BILL NUMBER: SB 764	CHAPTERED  09/27/00

	CHAPTER   706
	FILED WITH SECRETARY OF STATE   SEPTEMBER 27, 2000
	APPROVED BY GOVERNOR   SEPTEMBER 25, 2000
	PASSED THE SENATE   AUGUST 30, 2000
	PASSED THE ASSEMBLY   AUGUST 25, 2000
	AMENDED IN ASSEMBLY   AUGUST 18, 2000
	AMENDED IN ASSEMBLY   JUNE 19, 2000
	AMENDED IN ASSEMBLY   SEPTEMBER 1, 1999
	AMENDED IN ASSEMBLY   JULY 8, 1999
	AMENDED IN SENATE   MAY 18, 1999

INTRODUCED BY   Committee on Insurance (Senators Speier (Chair),
Figueroa, Hughes, Johnson, Johnston, Leslie, Lewis, and Sher)

                        FEBRUARY 24, 1999

   An act to add Article 3.5 (commencing with Section 1358.1) to
Chapter 2.2 of Division 2 of, and to repeal Article 3.5 (commencing
with Section 1358) of Chapter 2.2 of Division 2 of, the Health and
Safety Code, and to add Article 6 (commencing with Section 10192.1)
to Chapter 1 of Part 2 of Division 2 of, and to repeal Article 6
(commencing with Section 10192.05) of Chapter 1 of Part 2 of Division
2 of, the Insurance Code, relating to Medicare supplement insurance.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 764, Committee on Insurance.  Medicare supplement insurance.
   (1) Existing law provides for the regulation of Medicare
supplement insurance policies by the Insurance Commissioner, and for
the regulation of Medicare supplement contracts issued by health care
service plans by the Department of Managed Care.  These provisions
establish benefit standards for various coverage options offered by
the policies and contracts, impose disclosure, marketing, and
reporting requirements on insurers and health care service plans
offering these policies and contracts, and provide for various other
related regulations.  The willful violation of the provisions
governing health care service plans and the knowing or intentional
violation of the provisions governing persons in the business of
insurance are crimes.
   This bill would repeal these provisions and enact other, similar
provisions.  Because the bill's provisions governing health care
service plans and persons in the business of insurance would change
the definitions of crimes, this bill would impose a state-mandated
local program.
  (2) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state.  Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Article 3.5 (commencing with Section 1358) of Chapter
2.2 of Division 2 of the Health and Safety Code is repealed.
  SEC. 2.  Article 3.5 (commencing with Section 1358.1) is added to
Chapter 2.2 of Division 2 of the Health and Safety Code, to read:

      Article 3.5.  Additional Requirements for Medicare Supplement
Contracts

   1358.1.  Every health care service plan that offers any contract
that primarily or solely supplements Medicare or that is advertised
or represented as a supplement to Medicare, shall, in addition to
complying with this chapter and rules of the director, comply with
this article.  The basic health care services required to be provided
pursuant to Sections 1345 and 1367 shall not be included in Medicare
supplement contracts subject to this article, to the extent that
California is required to disallow coverage for these health care
services under the federal Medicare supplement standardization
requirements set forth in Section 1882 of the federal Social Security
Act (42 U.S.C.A. Sec. 1395ss).
   1358.2.  The purpose of this article is to provide for the
reasonable standardization of coverage and simplification of terms
and benefits of Medicare supplement contracts, to facilitate public
understanding and comparison of those contracts, to eliminate
provisions contained in those contracts that may be misleading or
confusing in connection with the purchase of the contracts or with
the settlement of claims, and to provide for full disclosures in the
sale of Medicare supplement contracts to persons eligible for
Medicare.
   1358.3.  (a) Except as otherwise provided in this section or in
Sections 1358.7, 1358.12, 1358.13, 1358.16, and 1358.21, this article
shall apply to all group and individual Medicare supplement
contracts advertised, solicited, or issued for delivery in this state
on or after January 1, 2001.
   (b) This article shall not apply to a contract of one or more
employers or labor organizations, or of the trustees of a fund
established by one or more employers or labor organizations, or
combination thereof, for employees or former employees, or a
combination thereof, or for members or former members, or a
combination thereof, of the labor organizations.
   (c) This article shall not apply to Medicare supplement policies
or certificates subject to Article 6 (commencing with Section
10192.1) of Chapter 1 of Part 1 of Division 2 of the Insurance Code.

   1358.4.  For the purposes of this article, the following terms
have the following meanings:
   (a) "Applicant" means:
   (1) An individual enrollee who seeks to contract for health
coverage, in the case of an individual Medicare supplement contract.

   (2) An enrollee who seeks to obtain health coverage through a
group, in the case of a group Medicare supplement contract.
   (b) "Bankruptcy" means that situation in which a Medicare+Choice
organization that is not an issuer has filed, or has had filed
against it, a petition for declaration of bankruptcy and has ceased
doing business in the state.
   (c) "Continuous period of creditable coverage" means the period
during which an individual was covered by creditable coverage, if
during the period of the coverage the individual had no breaks in
coverage greater than 63 days.
   (d) (1) "Creditable coverage" means, with respect to an
individual, coverage of the individual provided under any of the
following:
   (A) Any individual or group contract, policy, certificate, or
program that is written or administered by a health care service
plan, disability insurer, fraternal benefits society, self-insured
employer plan, or any other entity, in this state or elsewhere, and
that arranges or provides medical, hospital, and surgical coverage
not designed to supplement other private or governmental plans.  The
term includes continuation or conversion coverage.
   (B) Part A or B of Title XVIII of the federal Social Security Act
(Medicare).
   (C) Title XIX of the federal Social Security Act (medicaid), other
than coverage consisting solely of benefits under Section 1928 of
that act.
   (D) Chapter 55 of Title 10 of the United States Code (CHAMPUS).
   (E) A medical care program of the Indian Health Service or of a
tribal organization.
   (F) A state health benefits risk pool.
   (G) A health plan offered under Chapter 89 of Title 5 of the
United States Code (Federal Employees Health Benefits Program).
   (H) A public health plan as defined in federal regulations
authorized by Section 2701(c)(1)(I) of the federal Public Health
Service Act, as amended by Public Law 104-191, the federal Health
Insurance Portability and Accountability Act of 1996.
   (I) A health benefit plan under Section 5(e) of the federal Peace
Corps Act (Section 2504(e) of Title 22 of the United States Code).
   (J) Any other publicly sponsored program, provided in this state
or elsewhere, of medical, hospital, and surgical care.
   (K) Any other creditable coverage as defined by subsection (c) of
Section 2701 of Title XXVII of the federal Public Health Services Act
(42 U.S.C. Sec. 300gg(c)).
   (2) "Creditable coverage" shall not include one or more, or any
combination of, the following:
   (A) Coverage for accident-only or disability income insurance, or
any combination thereof.
   (B) Coverage issued as a supplement to liability insurance.
   (C) Liability insurance, including general liability insurance and
automobile liability insurance.
   (D) Workers' compensation or similar insurance.
   (E) Automobile medical payment insurance.
   (F) Credit-only insurance.
   (G) Coverage for onsite medical clinics.
   (H) Other similar insurance coverage, specified in federal
regulations, under which benefits for medical care are secondary or
incidental to other insurance benefits.
   (3) "Creditable coverage" shall not include the following benefits
if they are provided under a separate policy, certificate, or
contract or are otherwise not an integral part of the plan:
   (A) Limited scope dental or vision benefits.
   (B) Benefits for long-term care, nursing home care, home health
care, community-based care, or any combination thereof.
   (C) Other similar, limited benefits as are specified in federal
regulations.
   (4) "Creditable coverage" shall not include the following benefits
if offered as independent, noncoordinated benefits:
   (A) Coverage only for a specified disease or illness.
   (B) Hospital indemnity or other fixed indemnity insurance.
   (5) "Creditable coverage" shall not include the following if
offered as a separate policy, certificate, or contract:
   (A) Medicare supplemental health insurance as defined under
Section 1882(g)(1) of the federal Social Security Act.
   (B) Coverage supplemental to the coverage provided under Chapter
55 of Title 10 of the United States Code.
   (C) Similar supplemental coverage provided to coverage under a
group health plan.
   (e) "Employee welfare benefit plan" means a plan, fund, or program
of employee benefits as defined in Section 1002 of Title 29 of the
United States Code (Employee Retirement Income Security Act).
   (f) "Insolvency" means when an issuer, licensed to transact the
business of a health care service plan in this state, has had a final
order of liquidation entered against it with a finding of insolvency
by a court of competent jurisdiction in the issuer's state of
domicile.
   (g) "Issuer" means a health care service plan delivering, or
issuing for delivery, Medicare supplement contracts in this state,
but does not include entities subject to Article 6 (commencing with
Section 10192.1) of Chapter 1 of Division 2 of the Insurance Code.
   (h) "Medicare" means the federal Health Insurance for the Aged
Act, Title XVIII of the Social Security Amendments of 1965, as
amended.
   (i) "Medicare+Choice Plan" means a plan of coverage for health
benefits under Medicare Part C and includes:
   (1) Coordinated care plans that provide health care services,
including, but not limited to, health care service plans (with or
without a point-of-service option), plans offered by
provider-sponsored organizations, and preferred provider
organizations plans.
   (2) Medical savings account plans coupled with a contribution into
a Medicare+Choice medical savings account.
   (3) Medicare+Choice private fee-for-service plans.
   (j) "Medicare supplement contract" means a group or individual
plan contract of hospital and medical service associations or health
care service plans, other than a contract issued pursuant to a
contract under Section 1876 of the federal Social Security Act (42
U.S.C.A. Section 1395mm) or an issued contract under a demonstration
project specified in Section 1395ss(g)(1) of Title 42 of the United
States Code, which is advertised, marketed, or designed primarily as
a supplement to reimbursements under Medicare for the hospital,
medical, or surgical expenses of persons eligible for Medicare.
"Contract" means "Medicare supplement contract," unless the context
requires otherwise.
   (k) "Secretary" means the Secretary of the United States
Department of Health and Human Services.
   1358.5.  (a) A contract shall not be advertised, solicited, or
issued for delivery as a Medicare supplement contract unless the
contract contains definitions or terms that conform to the
requirements of this section.
   (1) (A) "Accident," "accidental injury," or "accidental means"
shall be defined to employ "result" language and shall not include
words that establish an accidental means test or use words such as
"external, violent, visible wounds" or other similar words of
description or characterization.
   (B) The definition shall not be more restrictive than the
following:  "injury or injuries for which benefits are provided means
accidental bodily injury sustained by the covered person that is the
direct result of an accident, independent of disease or bodily
infirmity or any other cause, and occurs while coverage is in force."

   (C) The definition may provide that injuries shall not include
injuries for which benefits are provided or available under any
workers' compensation, employer's liability, or similar law, unless
prohibited by law.
   (2) "Benefit period" or "Medicare benefit period" shall not be
defined more restrictively than as defined in the Medicare program.
   (3) "Convalescent nursing home," "extended care facility," or
"skilled nursing facility" shall not be defined more restrictively
than as defined in the Medicare program.
   (4) (A) "Health care expenses" means expenses of health care
service plans associated with the delivery of health care services,
which expenses are analogous to incurred losses of insurers.
   (B) "Health care expenses" shall not include any of the following:

   (i) Home office and overhead costs.
   (ii) Advertising costs.
   (iii) Commissions and other acquisition costs.
   (iv) Taxes.
   (v) Capital costs.
   (vi) Administrative costs.
   (vii) Claims processing costs.
   (5) "Hospital" may be defined in relation to its status,
facilities, and available services or to reflect its accreditation by
the Joint Commission on Accreditation of Hospitals, but not more
restrictively than as defined in the Medicare program.
   (6) "Medicare" shall be defined in the contract.  "Medicare" may
be substantially defined as "The Health Insurance for the Aged Act,
Title XVIII of the Social Security Amendments of 1965, as amended,"
or "Title I, Part I of Public Law 89-97, as enacted by the 89th
Congress and popularly known as the Health Insurance for the Aged
Act, as amended," or words of similar import.
   (7) "Medicare eligible expenses" shall mean expenses of the kinds
covered by Medicare, to the extent recognized as reasonable and
medically necessary by Medicare.
   (8) "Physician" shall not be defined more restrictively than as
defined in the Medicare program.
   (9) (A) "Sickness" shall not be defined more restrictively than as
follows:  "sickness means illness or disease of an insured person
that first manifests itself after the effective date of insurance and
while the insurance is in force."
   (B) The definition may be further modified to exclude sicknesses
or diseases for which benefits are provided under any workers'
compensation, occupational disease, employer's liability, or similar
law.
   (b) Nothing in this section shall be construed as prohibiting any
contract, by definitions or express provisions, from limiting or
restricting any or all of the benefits provided under the contract,
except in-area and out-of-area emergency services, to those health
care services that are delivered by issuer, employed, owned, or
contracting providers, and provider facilities, so long as the
contract complies with the provisions of Sections 1358.14 and 1367
and with Section 1300.67 of the California Code of Regulations.
   (c) Nothing in this section shall be construed as prohibiting any
contract that limits or restricts any or all of the benefits provided
under the contract in the manner contemplated in subdivision (b)
from limiting its obligation to deliver services, and disclaiming any
liability from any delay or failure to provide those services (1) in
the event of a major disaster or epidemic or (2) in the event of
circumstances not reasonably within the control of the issuer, such
as the partial or total destruction of facilities, war, riot, civil
insurrection, disability of a significant part of its health
personnel, or similar circumstances so long as the provisions comply
with the provisions of subdivision (h) of Section 1367.
   1358.6.  (a) (1) Except for permitted preexisting condition
clauses as described in Sections 1358.7 and 1358.8, a contract shall
not be advertised, solicited, or issued for delivery as a Medicare
supplement contract if the contract contains definitions,
limitations, exclusions, conditions, reductions, or other provisions
that are more restrictive or limiting than that term as officially
used in Medicare, except as expressly authorized by this article.
   (2) No issuer may advertise, solicit, or issue for delivery any
Medicare supplement contract with hospital or medical coverage if the
contract contains any of the prohibited provisions described in
subdivision (b).
   (b) The following provisions shall be deemed to be unfair,
unreasonable, and inconsistent with the objectives of this chapter
and shall not be contained in any Medicare supplement contract:
   (1) Any waiver, exclusion, limitation, or reduction based on or
relating to a preexisting disease or physical condition, unless that
waiver, exclusion, limitation, or reduction (A) applies only to
coverage for specified services rendered not more than six months
from the effective date of coverage, (B) is based on or relates only
to a preexisting disease or physical condition defined no more
restrictively than a condition for which medical advice was given or
treatment was recommended by or received from a physician within six
months before the effective date of coverage, (C) does not apply to
any coverage under any group contract, and (D) is approved in advance
by the director.  Any limitations with respect to a preexisting
condition shall appear as a separate paragraph of the contract and be
labeled "Preexisting Condition Limitations."
   (2) Except with respect to a group contract subject to, and in
compliance with, Section 1399.62, any provision denying coverage,
after termination of the contract, for services provided continuously
beginning while the contract was in effect, during the continuous
total disability of the subscriber or enrollee, except that the
coverage may be limited to a reasonable period of time not less than
the duration of the contract benefit period, if any, and may be
limited to the maximum benefits provided under the contract.
   (c) A Medicare supplement contract in force shall not contain
benefits that duplicate benefits provided by Medicare.
   1358.7.  A contract shall not be advertised, solicited, or issued
for delivery as a Medicare supplement contract prior to January 1,
2001, unless it meets or exceeds requirements applicable pursuant to
this code that were in effect prior to that date.
   1358.8.  The following standards are applicable to all Medicare
supplement contracts advertised, solicited, or issued for delivery on
or after January 1, 2001.  A contract shall not be advertised,
solicited, or issued for delivery as a Medicare supplement contract
unless it complies with these benefit standards.
   (a) The following general standards apply to Medicare supplement
contracts and are in addition to all other requirements of this
article:
   (1) A Medicare supplement contract shall not exclude or limit
benefits for losses incurred more than six months from the effective
date of coverage because it involved a preexisting condition.  The
contract shall not define a preexisting condition more restrictively
than a condition for which medical advice was given or treatment was
recommended by or received from a physician within six months before
the effective date of coverage.
   (2) A Medicare supplement contract shall not indemnify against
losses resulting from sickness on a different basis than losses
resulting from accidents.
   (3) A Medicare supplement contract shall provide that benefits
designed to cover cost-sharing amounts under Medicare will be changed
automatically to coincide with any changes in the applicable
Medicare deductible amount and copayment percentage factors.  Prepaid
or periodic charges may be modified to correspond with those
changes.
   (4) A Medicare supplement contract shall not provide for
termination of coverage of a spouse solely because of the occurrence
of an event specified for termination of coverage of the covered
person, other than the nonpayment of the prepaid or periodic charge.

   (5) Each Medicare supplement contract shall be guaranteed
renewable.
   (A) The issuer shall not cancel or nonrenew the contract solely on
the ground of health status of the individual.
   (B) The issuer shall not cancel or nonrenew the contract for any
reason other than nonpayment of the prepaid or periodic charge or
misrepresentation of the risk by the applicant that is shown by the
plan to be material to the acceptance for coverage.  The
contestability period for Medicare supplement contracts shall be two
years.
   (C) If a group Medicare supplement contract is terminated by the
subscriber and is not replaced as provided under subparagraph (E),
the issuer shall offer enrollees an individual Medicare supplement
contract that, at the option of the enrollee, either provides for
continuation of the benefits contained in the terminated contract or
provides for benefits that otherwise meet the requirements of this
subsection.
   (D) If an individual is an enrollee in a group Medicare supplement
contract and the individual membership in the group is terminated,
the issuer shall either offer the enrollee the conversion opportunity
described in subparagraph (C) or, at the option of the subscriber,
shall offer the enrollee continuation of coverage under the group
contract.
   (E) If a group Medicare supplement contract is replaced by another
group Medicare supplement contract purchased by the same subscriber,
the issuer of the replacement contract shall offer coverage to all
persons covered under the old group contract on its date of
termination.  Coverage under the new contract shall not result in any
exclusion for preexisting conditions that would have been covered
under the group contract being replaced.
   (6) Termination of a Medicare supplement contract shall be without
prejudice to any continuous loss that commenced while the contract
was in force, but the extension of benefits beyond the period during
which the contract was in force may be predicated upon the continuous
total disability of the covered person, limited to the duration of
the contract benefit period, if any, or to payment of the maximum
benefits.
   (7) (A) A Medicare supplement contract shall provide that benefits
and prepaid or periodic charges under the contract shall be
suspended at the request of the enrollee for the period, not to
exceed 24 months, in which the enrollee has applied for and is
determined to be entitled to medical assistance under Title XIX of
the federal Social Security Act, but only if the enrollee notifies
the issuer of the contract within 90 days after the date the
individual becomes entitled to assistance.
   (B) If suspension occurs and if the enrollee loses entitlement to
medical assistance, the contract shall be automatically reinstituted,
effective as of the date of termination of entitlement, as of the
termination of entitlement if the enrollee provides notice of loss of
entitlement within 90 days after the date of loss and pays the
prepaid or periodic charge attributable to the period, effective as
of the date of termination of entitlement.
   (C) Reinstitution of coverages:
   (i) Shall not provide for any waiting period with respect to
treatment of preexisting conditions.
   (ii) Shall provide for coverage which is substantially equivalent
to coverage in effect before the date of suspension.
   (iii) Shall provide for classification of prepaid or periodic
charges on terms at least as favorable to the enrollee as the prepaid
or periodic charge classification terms that would have applied to
the enrollee had the coverage not been suspended.
   (8) A Medicare supplement contract shall not be limited to
coverage for a single disease or affliction.
   (9) A Medicare supplement contract shall provide an examination
period of 30 days after the receipt of the contract by the applicant
for purposes of review, during which time the applicant may return
the contract as described in subdivision (e) of Section 1358.17.
   (10) A Medicare supplement contract shall additionally meet any
other minimum benefit standards as established by the director.
   (11) Within 30 days prior to the effective date of any Medicare
benefit changes, an issuer shall file with the director, and notify
its subscribers and enrollees of, modifications it has made to
Medicare supplement contracts.
   (A) The notice shall include a description of revisions to the
Medicare program and a description of each modification made to the
coverage provided under the Medicare supplement contract.
   (B) The notice shall inform each subscriber and enrollee as to
when any adjustment in the prepaid or periodic charges will be made
due to changes in Medicare benefits.
   (C) The notice of benefit modifications and any adjustments to the
prepaid or periodic charges shall be in outline form and in clear
and simple terms so as to facilitate comprehension.  The notice shall
not contain or be accompanied by any solicitation.
   (12) No modifications to existing Medicare supplement coverage
shall be made at the time of, or in connection with, the notice
requirements of this article except to the extent necessary to
eliminate duplication of Medicare benefits and any modifications
necessary under the contract to provide indexed benefit adjustment.
   (b) With respect to the standards for basic (core) benefits common
to all benefit plans, every issuer shall make available a contract
including only the following basic "core" package of benefits to each
prospective applicant.  This "core" package of benefits shall be
referred to as standardized Medicare supplement benefit plan "A".  An
issuer may make available to prospective applicants any of the other
Medicare supplement insurance benefit plans in addition to the basic
core package, but not in lieu of it.
   (1) Coverage of Part A Medicare eligible expenses for
hospitalization to the extent not covered by Medicare from the 61st
day to the 90th day, inclusive, in any Medicare benefit period.
   (2) Coverage of Part A Medicare eligible expenses incurred for
hospitalization to the extent not covered by Medicare for each
Medicare lifetime inpatient reserve day used.
   (3) Upon exhaustion of the Medicare hospital inpatient coverage
including the lifetime reserve days, coverage of the Medicare Part A
eligible expenses for hospitalization paid at the Medicare diagnostic
related group (DRG) day outlier per diem or other appropriate
standard of payment, subject to a lifetime maximum benefit of an
additional 365 days.  The provider shall accept the issuer's payment
as payment in full and may not bill the enrollee or subscriber for
any balance.
   (4) Coverage under Medicare Parts A and B for the reasonable cost
of the first three pints of blood, or equivalent quantities of packed
red blood cells, as defined under federal regulations, unless
replaced in accordance with federal regulations.
   (5) Coverage for the coinsurance amount, or in the case of
hospital outpatient services, the copayment amount, of Medicare
eligible expenses under Part B regardless of hospital confinement,
subject to the Medicare Part B deductible.
   (c) The following additional benefits shall be included in
Medicare supplement benefit plans B to J, inclusive, only as provided
by Section 1358.9.
   (1) With respect to the Medicare Part A deductible, coverage for
all of the Medicare Part A inpatient hospital deductible amount per
benefit period.
   (2) With respect to skilled nursing facility care, coverage for
the actual billed charges up to the coinsurance amount from the 21st
day to the 100th day, inclusive, in a Medicare benefit period for
posthospital skilled nursing facility care eligible under Medicare
Part A.
   (3) With respect to the Medicare Part B deductible, coverage for
all of the Medicare Part B deductible amount per calendar year
regardless of hospital confinement.
   (4) With respect to 80 percent of the Medicare Part B excess
charges, coverage for 80 percent of the difference between the actual
Medicare Part B charge as billed, not to exceed any charge
limitation established by the Medicare program or state law, and the
Medicare-approved Part B charge.
   (5) With respect to 100 percent of the Medicare Part B excess
charges, coverage for all of the difference between the actual
Medicare Part B charge as billed, not to exceed any charge limitation
established by the Medicare program or state law, and the
Medicare-approved Part B charge.
   (6) With respect to the basic outpatient prescription drug
benefit, coverage for 50 percent of outpatient prescription drug
charges, after a two hundred fifty dollar ($250) calendar year
deductible, to a maximum of one thousand two hundred fifty dollars
($1,250) in benefits received by the insured per calendar year, to
the extent not covered by Medicare.
                                               (7) With respect to
the extended outpatient prescription drug benefit, coverage for 50
percent of outpatient prescription drug charges, after a two hundred
fifty dollar ($250) calendar year deductible, to a maximum of three
thousand dollars ($3,000) in benefits received by the insured per
calendar year, to the extent not covered by Medicare.
   (8) With respect to medically necessary emergency care in a
foreign country, coverage to the extent not covered by Medicare for
80 percent of the billed charges for Medicare-eligible expenses for
medically necessary emergency hospital, physician, and medical care
received in a foreign country, which care would have been covered by
Medicare if provided in the United States and which care began during
the first 60 consecutive days of each trip outside the United
States, subject to a calendar year deductible of two hundred fifty
dollars ($250), and a lifetime maximum benefit of fifty thousand
dollars ($50,000).  For purposes of this benefit, "emergency care"
shall mean care needed immediately because of an injury or an illness
of sudden and unexpected onset.
   (9) With respect to the preventive medical care benefit, coverage
for the following preventive health services:
   (A) An annual clinical preventive medical history and physical
examination that may include tests and services from subparagraph (B)
and patient education to address preventive health care measures.
   (B) Any one or a combination of the following preventive screening
tests or preventive services, the frequency of which is considered
medically appropriate:
   (i) Fecal occult blood test or digital rectal examination, or
both.
   (ii) Mammogram.
   (iii) Dipstick urinalysis for hematuria, bacteriuria, and
proteinuria.
   (iv) Pure tone, air only, hearing screening test, administered or
ordered by a physician.
   (v) Serum cholesterol screening every five years.
   (vi) Thyroid function test.
   (vii) Diabetes screening.
   (C) Influenza vaccine administered at any appropriate time during
the year and tetanus and diphtheria booster every 10 years.
   (D) Any other tests or preventive measures determined appropriate
by the attending physician.
   Reimbursement shall be for the actual charges up to 100 percent of
the Medicare-approved amount for each service, as if Medicare were
to cover the service as identified in American Medical Association
Current Procedural Terminology (AMA CPT) codes, to a maximum of one
hundred twenty dollars ($120) annually under this benefit.  This
benefit shall not include payment for any procedure covered by
Medicare.
   (10) With respect to the at-home recovery benefit, coverage for
services to provide short-term, at-home assistance with activities of
daily living for those recovering from an illness, injury, or
surgery.
   (A) For purposes of this benefit, the following definitions shall
apply:
   (i) "Activities of daily living" include, but are not limited to,
bathing, dressing, personal hygiene, transferring, eating,
ambulating, assistance with drugs that are normally
self-administered, and changing bandages or other dressings.
   (ii) "Care provider" means a duly qualified or licensed home
health aide or homemaker, or a personal care aide or nurse provided
through a licensed home health care agency or referred by a licensed
referral agency or licensed nurses registry.
   (iii) "Home" shall mean any place used by the insured as a place
of residence, provided that the place would qualify as a residence
for home health care services covered by Medicare.  A hospital or
skilled nursing facility shall not be considered the insured's place
of residence.
   (iv) "At-home recovery visit" means the period of a visit required
to provide at-home recovery care, without any limit on the duration
of the visit, except that each consecutive four hours in a 24-hour
period of services provided by a care provider is one visit.
   (B) With respect to coverage requirements and limitations, the
following shall apply:
   (i) At-home recovery services provided shall be primarily services
that assist in activities of daily living.
   (ii) The covered person's attending physician shall certify that
the specific type and frequency of at-home recovery services are
necessary because of a condition for which a home care plan of
treatment was approved by Medicare.
   (iii) Coverage is limited to the following:
   (I) No more than the number and type of at-home recovery visits
certified as necessary by the covered person's attending physician.
The total number of at-home recovery visits shall not exceed the
number of Medicare-approved home health care visits under a
Medicare-approved home care plan of treatment.
   (II) The actual charges for each visit up to a maximum
reimbursement of forty dollars ($40) per visit.
   (III) One thousand six hundred dollars ($1,600) per calendar year.

   (IV) Seven visits in any one week.
   (V) Care furnished on a visiting basis in the insured's home.
   (VI) Services provided by a care provider as defined in
subparagraph (A).
   (VII) At-home recovery visits while the covered person is covered
under the policy or certificate and not otherwise excluded.
   (VIII) At-home recovery visits received during the period the
covered person is receiving Medicare-approved home care services or
no more than eight weeks after the service date of the last
Medicare-approved home health care visit.
   (C) Coverage is excluded for the following:
   (i) Home care visits paid for by Medicare or other government
programs.
   (ii) Care provided by family members, unpaid volunteers, or
providers who are not care providers.
   (11) With respect to new or innovative benefits, an issuer may,
with the prior approval of the director, offer contracts with new or
innovative benefits in addition to the benefits provided in a
contract that otherwise complies with the applicable standards.  The
new or innovative benefits may include benefits that are appropriate
to Medicare supplement contracts, new or innovative, not otherwise
available, cost-effective, and offered in a manner which is
consistent with the goal of simplification of Medicare supplement
contracts.
   (d) A contract shall not contain any provision delaying the
effective date of coverage beyond the first day of the month
following the date of receipt by the issuer of the applicant's
properly completed application, except that the effective date of
coverage may be delayed until the 65th birthday of an applicant who
is to become eligible for Medicare by reason of age if the
application is received any time during the three months immediately
preceding the applicant's 65th birthday.
   1358.9.  (a) An issuer shall make available to each prospective
enrollee a contract form containing only the basic (core) benefits,
as defined in subdivision (b) of Section 1358.8.
   (b) No groups, packages, or combinations of Medicare supplement
benefits other than those listed in this section shall be offered for
sale in this state, except as may be permitted by paragraph (11) of
subdivision (c) of Section 1358.8 and by Section 1358.10.
   (c) Benefit plans shall be uniform in structure, language,
designation and format to the standard benefit plans A to J,
inclusive, listed in subdivision (e), and shall conform to the
definitions in Section 1358.4.  Each benefit shall be structured in
accordance with the format provided in subdivisions (b) and (c) of
Section 1358.8 and list the benefits in the order listed in
subdivision (e).  For purposes of this section, "structure, language,
and format" means style, arrangement, and overall content of a
benefit.
   (d) An issuer may use, in addition to the benefit plan
designations required in subdivision (c), other designations to the
extent permitted by law.
   (e) With respect to the makeup of benefit plans, the following
shall apply:
   (1) Standardized Medicare supplement benefit plan A shall be
limited to the basic (core) benefit common to all benefit plans, as
defined in subdivision (b) of Section 1358.8.
   (2) Standardized Medicare supplement benefit plan B shall include
only the following:  the core benefit, plus the Medicare Part A
deductible as defined in paragraph (1) of subdivision (c) of Section
1358.8.
   (3) Standardized Medicare supplement benefit plan C shall include
only the following:  the core benefit, plus the Medicare Part A
deductible, skilled nursing facility care, Medicare Part B
deductible, and medically necessary emergency care in a foreign
country as defined in paragraphs (1), (2), (3), and (8) of
subdivision (c) of Section 1358.8, respectively.
   (4) Standardized Medicare supplement benefit plan D shall include
only the following:  the core benefit, plus the Medicare Part A
deductible, skilled nursing facility care, medically necessary
emergency care in a foreign country, and the at-home recovery benefit
as defined in paragraphs (1), (2), (8), and (10) of subdivision (c)
of Section 1358.8, respectively.
   (5) Standardized Medicare supplement benefit plan E shall include
only the following:  the core benefit, plus the Medicare Part A
deductible, skilled nursing facility care, medically necessary
emergency care in a foreign country, and preventive medical care as
defined in paragraphs (1), (2), (8), and (9) of subdivision (c) of
Section 1358.8, respectively.
   (6) Standardized Medicare supplement benefit plan F shall include
only the following:  the core benefit, plus the Medicare Part A
deductible, the skilled nursing facility care, the Medicare Part B
deductible, 100 percent of the Medicare Part B excess charges, and
medically necessary emergency care in a foreign country as defined in
paragraphs (1), (2), (3), (5), and (8) of subdivision (c) of Section
1358.8, respectively.
   (7) Standardized Medicare supplement benefit high deductible plan
F shall include only the following:  100 percent of covered expenses
following the payment of the annual high deductible plan F
deductible.  The covered expenses include the core benefit, plus the
Medicare Part A deductible, skilled nursing facility care, the
Medicare Part B deductible, 100 percent of the Medicare Part B excess
charges, and medically necessary emergency care in a foreign country
as defined in paragraphs (1), (2), (3), (5), and (8) of subdivision
(c) of Section 1358.8, respectively.  The annual high deductible plan
F deductible shall consist of out-of-pocket expenses, other than
premiums, for services covered by the Medicare supplement plan F
policy, and shall be in addition to any other specific benefit
deductibles.  The annual high deductible Plan F deductible shall be
one thousand five hundred dollars ($1,500) for 1998 and 1999, and
shall be based on the calendar year, as adjusted annually thereafter
by the secretary to reflect the change in the Consumer Price Index
for all urban consumers for the 12-month period ending with August of
the preceding year, and rounded to the nearest multiple of ten
dollars ($10).
   (8) Standardized Medicare supplement benefit plan G shall include
only the following:  the core benefit, plus the Medicare Part A
deductible, skilled nursing facility care, 80 percent of the Medicare
Part B excess charges, medically necessary emergency care in a
foreign country, and the at-home recovery benefit as defined in
paragraphs (1), (2), (4), (8), and (10) of Section 1358.8,
respectively.
   (9) Standardized Medicare supplement benefit plan H shall consist
of only the following:  the core benefit, plus the Medicare Part A
deductible, skilled nursing facility care, basic outpatient
prescription drug benefit, and medically necessary emergency care in
a foreign country as defined in paragraphs (1), (2), (6), and (8) of
Section 1358.8, respectively.
   (10) Standardized Medicare supplement benefit plan I shall consist
of only the following:  the core benefit, plus the Medicare Part A
deductible, skilled nursing facility care, 100 percent of the
Medicare Part B excess charges, basic outpatient prescription drug
benefit, medically necessary emergency care in a foreign country, and
at-home recovery benefit as defined in paragraphs (1), (2), (5),
(6), (8), and (10) of subdivision (c) of Section 1358.8,
respectively.
   (11) Standardized Medicare supplement benefit plan J shall consist
of only the following:  the core benefit, plus the Medicare Part A
deductible, skilled nursing facility care, Medicare Part B
deductible, 100 percent of the Medicare Part B excess charges,
extended outpatient prescription drug benefit, medically necessary
emergency care in a foreign country, preventive medical care, and
at-home recovery benefit as defined in paragraphs (1), (2), (3), (5),
(7), (8), (9), and (10) of subdivision (c) of Section 1358.8,
respectively.
   (12) Standardized Medicare supplement benefit high deductible plan
J shall consist of only the following:  100 percent of covered
expenses following the payment of the annual high deductible plan J
deductible.  The covered expenses include the core benefit, plus the
Medicare Part A deductible, skilled nursing facility care, Medicare
Part B deductible, 100 percent of the Medicare Part B excess charges,
extended outpatient prescription drug benefit, medically necessary
emergency care in a foreign country, preventive medical care benefit,
and at-home recovery benefit as defined in paragraphs (1), (2), (3),
(5), (7), (8), (9), and (10) of subdivision (c) of Section 1358.8,
respectively.  The annual high deductible plan J deductible shall
consist of out-of-pocket expenses, other than premiums, for services
covered by the Medicare supplement plan J policy, and shall be in
addition to any other specific benefit deductibles.  The annual
deductible shall be one thousand five hundred dollars ($1,500) for
1998 and 1999, and shall be based on a calendar year, as adjusted
annually thereafter by the secretary to reflect the change in the
Consumer Price Index for all urban consumers for the 12-month period
ending with August of the preceding year, and rounded to the nearest
multiple of ten dollars ($10).
   1358.10.  (a) (1) This section shall apply to Medicare Select
contracts, as defined in this section.
   (2) A contract shall not be advertised as a Medicare Select
contract unless it meets the requirements of this section.
   (b) For the purposes of this section:
   (1) "Complaint" means any dissatisfaction expressed by an
individual concerning a Medicare Select issuer or its network
providers.
   (2) "Grievance" means dissatisfaction expressed in writing by an
individual covered by a Medicare Select contract with the
administration, claims practices, or provision of services concerning
a Medicare Select issuer or its network providers.
   (3) "Medicare Select issuer" means an issuer offering, or seeking
to offer, a Medicare Select contract.
   (4) "Medicare Select contract" means a Medicare supplement
contract that contains restricted network provisions.
   (5) "Network provider" means a provider of health care, or a group
of providers of health care, which has entered into a written
agreement with the issuer to provide benefits covered under a
Medicare Select contract.  "Provider network" means a grouping of
network providers.
   (6) "Restricted network provision" means any provision which
conditions the payment of benefits, in whole or in part, on the use
of network providers.
   (7) "Service area" means the geographic area approved by the
director within which an issuer is authorized to offer a Medicare
Select contract.
   (c) The director may authorize an issuer to offer a Medicare
Select contract pursuant to Section 4358 of the federal Omnibus
Budget Reconciliation Act (OBRA) of 1990 if the director finds that
the issuer's Medicare Select contracts are in compliance with this
chapter and if the director finds that the issuer has satisfied all
of the requirements of this section.
   (d) A Medicare Select issuer shall not issue a Medicare Select
contract in this state until its plan of operation has been approved
by the director.
   (e) A Medicare Select issuer shall file a proposed plan of
operation with the director in a format prescribed by the director.
The plan of operation shall contain at least the following
information:
   (1) Evidence that all covered services that are subject to
restricted network provisions are available and accessible through
network providers, including a demonstration of all of the following:

   (A) That services can be provided by network providers with
reasonable promptness with respect to geographic location, hours of
operation, and afterhour care.  The hours of operation and
availability of afterhour care shall reflect usual practice in the
local area.  Geographic availability shall reflect the usual travel
times within the community.
   (B) That the number of network providers in the service area is
sufficient, with respect to current and expected enrollees, as to
either of the following:
   (i) To deliver adequately all services that are subject to a
restricted network provision.
   (ii) To make appropriate referrals.
   (C) There are written agreements with network providers describing
specific responsibilities.
   (D) Emergency care is available 24 hours per day and seven days
per week.
   (E) In the case of covered services that are subject to a
restricted network provision and are provided on a prepaid basis,
that there are written agreements with network providers prohibiting
the providers from billing or otherwise seeking reimbursement from or
recourse against any individual covered under a Medicare Select
contract.
   This subparagraph shall not apply to supplemental charges or
coinsurance amounts as stated in the Medicare Select contract.
   (2) A statement or map providing a clear description of the
service area.
   (3) A description of the grievance procedure to be utilized.
   (4) A description of the quality assurance program, including all
of the following:
   (A) The formal organizational structure.
   (B) The written criteria for selection, retention, and removal of
network providers.
   (C) The procedures for evaluating quality of care provided by
network providers, and the process to initiate corrective action when
warranted.
   (5) A list and description, by specialty, of the network
providers.
   (6) Copies of the written information proposed to be used by the
issuer to comply with subdivision (i).
   (7) Any other information requested by the director.
   (f) (1) A Medicare Select issuer shall file any proposed changes
to the plan of operation, except for changes to the list of network
providers, with the director prior to implementing the changes.
Changes shall be considered approved by the director after 30 days
unless specifically disapproved.
   (2) An updated list of network providers shall be filed with the
director at least quarterly.
   (g) A Medicare Select contract shall not restrict payment for
covered services provided by nonnetwork providers if:
   (1) The services are for symptoms requiring emergency care or are
immediately required for an unforeseen illness, injury, or condition.

   (2) It is not reasonable to obtain services through a network
provider.
   (h) A Medicare Select contract shall provide payment for full
coverage under the contract for covered services that are not
available through network providers.
   (i) A Medicare Select issuer shall make full and fair disclosure
in writing of the provisions, restrictions, and limitations of the
Medicare Select contract to each applicant.  This disclosure shall
include at least the following:
   (1) An outline of coverage sufficient to permit the applicant to
compare the coverage and charges of the Medicare Select contract with
both of the following:
   (A) Other Medicare supplement contracts offered by the issuer.
   (B) Other Medicare Select contracts.
   (2) A description, including address, telephone number, and hours
of operation, of the network providers, including primary care
physicians, specialty physicians, hospitals, and other providers.
   (3) A description of the restricted network provisions, including
payments for coinsurance and deductibles when providers other than
network providers are utilized.
   (4) A description of coverage for emergency and urgently needed
care and other out-of-service area coverage.
   (5) A description of limitations on referrals to restricted
network providers and to other providers.
   (6) A description of the enrollee's rights to purchase any other
Medicare supplement contract otherwise offered by the issuer.
   (7) A description of the Medicare Select issuer's quality
assurance program and grievance procedure.
   (j) Prior to the sale of a Medicare Select contract, a Medicare
Select issuer shall obtain from the applicant a signed and dated form
stating that the applicant has received the information provided
pursuant to subdivision (i) and that the applicant understands the
restrictions of the Medicare Select contract.
   (k) A Medicare Select issuer shall have and use procedures for
hearing complaints and resolving written grievances from the
enrollees.  The procedures shall be aimed at mutual agreement for
settlement and may include arbitration procedures.
   (1) The grievance procedure shall be described in the contract and
in the outline of coverage.
   (2) At the time the contract is issued, the issuer shall provide
detailed information to the enrollee describing how a grievance may
be registered with the issuer.
   (3) Grievances shall be considered in a timely manner and shall be
transmitted to appropriate decisionmakers who have authority to
fully investigate the issue and take corrective action.
   (4) If a grievance is found to be valid, corrective action shall
be taken promptly.
   (5) All concerned parties shall be notified about the results of a
grievance.
   (6) The issuer shall report no later than each March 31st to the
director regarding its grievance procedure.  The report shall be in a
format prescribed by the director and shall contain the number of
grievances filed in the past year and a summary of the subject,
nature, and resolution of those grievances.
   (l) At the time of initial purchase, a Medicare Select issuer
shall make available to each applicant for a Medicare Select contract
the opportunity to purchase any Medicare supplement contract
otherwise offered by the issuer.
   (m) (1) At the request of an enrollee under a Medicare Select
contract, a Medicare Select issuer shall make available to the
enrollee the opportunity to purchase a Medicare supplement contract
offered by the issuer that has comparable or lesser benefits and that
does not contain a restricted network provision, if a Medicare
supplement contract of that nature is offered by the issuer.  The
issuer shall make the contracts available without regard to the
health status of the enrollee and without requiring evidence of
insurability after the Medicare Select contract has been in force for
six months.
   (2) For the purposes of this subdivision, a Medicare supplement
contract will be considered to have comparable or lesser benefits
unless it contains one or more significant benefits not included in
the Medicare Select contract being replaced. For the purposes of this
paragraph, a significant benefit means coverage for the Medicare
Part A deductible, coverage for prescription drugs, coverage for
at-home recovery services, or coverage for Medicare Part B excess
charges.
   (n) Medicare Select contracts shall provide for continuation of
coverage in the event the secretary determines that Medicare Select
contracts issued pursuant to this section should be discontinued due
to either the failure of the Medicare Select program to be
reauthorized under law or its substantial amendment.
   (1) Each Medicare Select issuer shall make available to each
enrollee covered by a Medicare Select contract the opportunity to
purchase any Medicare supplement contract offered by the issuer that
has comparable or lesser benefits and that does not contain a
restricted provider network provision, if a Medicare supplement
contract of that nature is offered by the issuer.  The issuer shall
make the contracts available without regard to the health status of
the enrollee and without requiring evidence of insurability after the
Medicare Select contract has been in force for six months.
   (2) For the purposes of this subdivision, a Medicare supplement
contract will be considered to have comparable or lesser benefits
unless it contains one or more significant benefits not included in
the Medicare Select contract being replaced.  For the purposes of
this paragraph, a significant benefit means coverage for the Medicare
Part A deductible, coverage for prescription drugs, coverage for
at-home recovery services, or coverage for Medicare Part B excess
charges.
   (o) An issuer offering Medicare Select contracts shall comply with
reasonable requests for data made by state or federal agencies,
including the United States Department of Health and Human Services,
for the purpose of evaluating the Medicare Select program.  An issuer
shall not issue a Medicare Select contract in this state until the
contract has been approved by the director.
   1358.11.  (a) An issuer shall not deny or condition the offering
or effectiveness of any Medicare supplement contract available for
sale in this state, nor discriminate in the pricing of a contract
because of the health status, claims experience, receipt of health
care, or medical condition of an applicant in the case of an
application for a contract that is submitted prior to or during the
six-month period beginning with the first day of the first month in
which an individual is both 65 years of age or older and is enrolled
for benefits under Medicare Part B.  Each Medicare supplement
contract currently available from an issuer shall be made available
to all applicants who qualify under this subdivision without regard
to age.
   (b) (1) If an applicant qualifies under subdivision (a) and
submits an application during the time period referenced in
subdivision (a) and, as of the date of application, has had a
continuous period of creditable coverage of at least six months, the
issuer shall not exclude benefits based on a preexisting condition.
   (2) If the applicant qualifies under subdivision (a) and submits
an application during the time period referenced in subdivision (a)
and, as of the date of application, has had a continuous period of
creditable coverage that is less than six months, the issuer shall
reduce the period of any preexisting condition exclusion by the
aggregate of the period of creditable coverage applicable to the
applicant as of                                               the
enrollment date.  The manner of the reduction under this subdivision
shall be as specified by the director.
   (c) Except as provided in subdivision (b) and Section 1358.23,
subdivision (a) shall not be construed as preventing the exclusion of
benefits under a contract, during the first six months, based on a
preexisting condition for which the enrollee received treatment or
was otherwise diagnosed during the six months before the coverage
became effective.
   (d) An individual enrolled in Medicare Part B by reason of
disability shall be entitled to open enrollment described in this
section for six months after he or she reaches age 65.  Sales during
the open enrollment period shall not be discouraged by any means,
including the altering of the commission structure.
   (e) An individual who is 65 years of age or older and enrolled in
Medicare Part B is entitled to open enrollment described in this
section for six months following:
   (1) Receipt of a notice of termination or, if no notice is
received, the effective date of termination, from any
employer-sponsored health plan including an employer-sponsored
retiree health plan.  For purposes of this section,
"employer-sponsored retiree health plan" includes any coverage for
medical expenses that is directly or indirectly sponsored or
established by an employer for employees or retirees, their spouses,
dependents, or other included covered persons.
   (2) Termination of health care services for a military retiree or
the retiree's Medicare eligible spouse or dependent as a result of a
military base closure.
   (f) An individual who is 65 years of age or older and enrolled in
Medicare Part B is entitled to open enrollment described in this
section if the individual was covered under a policy, certificate, or
contract providing Medicare supplement coverage but that coverage
terminated because the individual established residence at a location
not served by the issuer.
   (g) (1) An individual who was previously enrolled in, but whose
coverage was terminated between September 1, 1998, and December 31,
1998, by a Medicare managed care plan shall be entitled to a new
60-day open enrollment period in addition to any open enrollment
authorized by federal law or regulations, for any and all Medicare
supplement coverage available on a guaranteed basis under state and
federal law or regulation for persons terminated by their Medicare
managed care plan.
   (2) The new open enrollment period specified in paragraph (1)
shall commence 90 days after January 1, 2000.  Within 30 days of
January 1, 2000, health plans shall notify their former Medicare
enrollees who were terminated during the period specified in
paragraph (1) of the new open enrollment period.  Health plan notices
shall inform the terminated enrollees of the opportunity to secure
advice and assistance from the Health Insurance Counseling and
Advocacy Program (HICAP) in their area, along with the toll-free
telephone number for HICAP.
   (3) An individual who was previously enrolled in but whose
coverage was terminated after January 1, 1999, by a Medicare managed
care plan shall be entitled to an additional 60-day open enrollment
period to be added on to and run consecutively after any open
enrollment period authorized by federal law or regulations, for any
and all Medicare supplement coverage available on a guaranteed basis
under state and federal law or regulations for persons terminated by
their Medicare managed care plan.
   (4) Health plans that terminate Medicare enrollees shall notify
those enrollees in the termination notice of the additional open
enrollment period authorized by this subdivision.  Health plan
notices shall inform enrollees of the opportunity to secure advice
and assistance from the Health Insurance Counseling Advocacy Program
(HICAP) in their area, along with the toll-free telephone number for
HICAP.
   (h) An individual shall be entitled to an annual open enrollment
period lasting 30 days or more, commencing with the individual's
birthday, during which time that person may purchase any Medicare
supplement coverage, with the exception of a Medicare Select
contract, that offers benefits equal to or lesser than those provided
by the previous coverage.  During this open enrollment period, no
issuer that falls under this provision shall deny or condition the
issuance or effectiveness of Medicare supplement coverage, nor
discriminate in the pricing of coverage, because of health status,
claims experience, receipt of health care, or medical condition of
the individual if, at the time of the open enrollment period, the
individual is covered under another Medicare supplement policy,
certificate, or contract.  An issuer that offers Medicare supplement
contracts shall notify an enrollee of his or her rights under this
subdivision at least 30 and no more than 60 days before the beginning
of the open enrollment period.
   1358.12.  (a) (1) With respect to the guaranteed issue of a
Medicare supplement contract, eligible persons are those individuals
described in subdivision (b) who apply to enroll under the contract
not later than 63 days after the date of the termination of
enrollment described in subdivision (b), and who submit evidence of
the date of termination or disenrollment with the application for a
Medicare supplement contract.
   (2) With respect to eligible persons, an issuer shall not deny or
condition the issuance or effectiveness of a Medicare supplement
contract described in subdivision (c) that is offered and is
available for issuance to new enrollees by the issuer, shall not
discriminate in the pricing of the Medicare supplement contract
because of health status, claims experience, receipt of health care,
or medical condition, and shall not impose an exclusion of benefits
based on a preexisting condition under the Medicare supplement
contract.
   (b) An eligible person is an individual described in any of the
following paragraphs:
   (1) The individual is enrolled under an employee welfare benefit
plan that provides health benefits that supplement the benefits under
Medicare, and the plan terminates, or the plan ceases to provide all
of those supplemental health benefits to the individual.
   (2) The individual is enrolled with a Medicare+Choice organization
under a Medicare+Choice plan under Medicare Part C, and any of the
following apply:
   (A) The organization's or plan's certification, under this part,
has been terminated or the organization has terminated or otherwise
discontinued providing the plan in the area in which the individual
resides.
   (B) The individual is no longer eligible to elect the plan because
of a change in the individual's place of residence or other change
in circumstances specified by the secretary, but not including
termination of the individual's enrollment on the basis described in
Section 1851(g)(3)(B) of the federal Social Security Act, where the
individual has not paid premiums on a timely basis or has engaged in
disruptive behavior as specified in standards under Section 1856 of
that act, or the plan is terminated for all individuals within a
residence area.
   (C) The individual demonstrates, in accordance with guidelines
established by the director, either of the following:
   (i) The organization offering the plan substantially violated a
material provision of the organization's contract under this article
in relation to the individual, including the failure to provide an
enrollee on a timely basis medically necessary care for which
benefits are available under the plan or the failure to provide the
covered care in accordance with applicable quality standards.
   (ii) The organization, or agent or other entity acting on the
organization's behalf, materially misrepresented the plan's
provisions in marketing the plan to the individual.
   (D) The individual meets other exceptional conditions as the
director may provide.
   (3) The individual meets both of the following conditions:
   (A) The individual is enrolled with any of the following:
   (i) An eligible organization under a contract under Section 1876
of the federal Social Security Act (Medicare risk or cost).
   (ii) A similar organization operating under demonstration project
authority, effective for periods before April 1, 1999.
   (iii) An organization under an agreement under Section 1833(a)(1)
(A) of the federal Social Security Act (health care prepayment plan).

   (iv) An organization under a Medicare Select policy.
   (B) The individual's enrollment ceases under the same
circumstances that would permit discontinuance of an individual's
election of coverage under the first sentence of Section 1851(e)(4)
of the federal Social Security Act as delineated in paragraph (2) of
subdivision (b).
   (4) The individual is enrolled under a Medicare supplement
contract and the enrollment ceases because of the following:  the
insolvency of the issuer or bankruptcy of the nonissuer organization;
the involuntary termination of coverage or enrollment under the
contract; the issuer of the contract substantially violated a
material provision of the contract; or the issuer, or an agent or
other entity acting on the issuer's behalf, materially misrepresented
the contract's provisions in marketing the contract to the
individual.
   (5) The individual meets both of the following conditions:
   (A) The individual was enrolled under a Medicare supplement
contract and terminates enrollment and subsequently enrolls, for the
first time, with any Medicare+Choice organization under a
Medicare+Choice plan under Medicare Part C, any eligible organization
under a contract under Section 1876 of the federal Social Security
Act (Medicare risk or cost), any similar organization operating under
demonstration project authority, an organization under an agreement
under Section 1833(a)(1)(A) of the federal Social Security Act
(health care prepayment plan), or a Medicare Select contract.
   (B) The subsequent enrollment under subparagraph (A) is terminated
by the enrollee during any period within the first 12 months of the
subsequent enrollment (during which the enrollee is permitted to
terminate the subsequent enrollment under Section 1851(e) of the
federal Social Security Act).
   (6) The individual, upon first becoming eligible for benefits
under Medicare Part A at age 65 years, enrolls in a Medicare+Choice
plan under Medicare Part C, and disenrolls from the plan by not later
than 12 months after the effective date of enrollment.
   (c) (1) Under paragraphs (1), (2), (3), and (4) of subdivision
(b), eligible persons are entitled to a Medicare supplement contract
that has a benefit package classified as plan A, B, C, or F offered
by any issuer.
   (2) Under paragraph (5) of subdivision (b), eligible persons are
entitled to the same Medicare supplement contract in which they were
most recently previously enrolled, if available from the same issuer,
or, if not so available, a contract described in paragraph (1) of
subdivision (c).
   (3) Under paragraph (6) of subdivision (b), eligible persons are
entitled to any Medicare supplement contract offered by any issuer.
   (d) (1) At the time of an event described in subdivision (b)
because of which an individual loses coverage or benefits due to the
termination of a contract or agreement, policy, or plan, the
organization that terminates the contract or agreement, the issuer
terminating the contract, or the administrator of the plan being
terminated, respectively, shall notify the individual of his or her
rights under this section, and of the obligations of issuers of
Medicare supplement contracts under subdivision (a).  That notice
shall be communicated contemporaneously with the notification of
termination.
   (2) At the time of an event described in subdivision (b) because
of which an individual ceases enrollment under a contract or
agreement, policy, or plan, the organization that offers the contract
or agreement, regardless of the basis for the cessation of
enrollment, the issuer offering the contract, or the administrator of
the plan, respectively, shall notify the individual of his or her
rights under this section, and of the obligations of issuers of
Medicare supplement contracts under subdivision (a).  That notice
shall be communicated within ten working days of the issuer receiving
notification of disenrollment.
   1358.13. (a) An issuer shall comply with Section 1882(c)(3) of the
federal Social Security Act (as enacted by Section 4081(b)(2)(C) of
the federal Omnibus Budget Reconciliation Act of 1987 (OBRA), Public
Law 100-203) by doing all of the following:
   (1) Accepting a notice from a Medicare carrier on dually assigned
claims submitted by participating physicians and suppliers as a claim
for benefits in place of any other claim form otherwise required and
making a payment determination on the basis of the information
contained in that notice.
   (2) Notifying the participating physician or supplier and the
beneficiary of the payment determination.
   (3) Paying the participating physician or supplier directly.
   (4) Furnishing, at the time of enrollment, each enrollee with a
card listing the contract name, number, and a central mailing address
to which notices respecting coverage from a Medicare carrier may be
sent.
   (5) Paying user fees established under Section 1395u(h)(3)(B) of
Title 42 of the United States Code, for claim notices that are
transmitted electronically or otherwise.
   (6) Providing to the secretary, at least annually, a central
mailing address to which all claims may be sent by Medicare carriers.

   (b) Compliance with the requirements set forth in subdivision (a)
shall be certified on the Medicare supplement insurance experience
reporting form provided by the director.
   1358.14.  (a) (1) (A) With respect to loss ratio standards, a
Medicare supplement contract shall not be advertised, solicited, or
issued for delivery unless the contract can be expected, as estimated
for the entire period for which prepaid or periodic charges are
computed to provide coverage, to return to subscribers and enrollees
in the form of aggregate benefits under the contract, not including
anticipated refunds or credits provided under the contract, at least
75 percent of the aggregate amount of charges earned in the case of
group contracts, or at least 65 percent of the aggregate amount of
charges earned in the case of individual contracts, on the basis of
incurred claims or costs of health care services experience and
earned prepaid or periodic charges for that period and in accordance
with accepted actuarial principles and practices.
   (B) Loss ratio standards shall be calculated on the basis of
incurred health care expenses where coverage is provided by a health
care service plan on a service rather than reimbursement basis, and
earned prepaid or periodic charges shall be calculated for the period
and in accordance with accepted actuarial principles and practices.

   (2) All filings of rates and rating schedules shall demonstrate
that expected claims in relation to prepaid or periodic charges
comply with the requirements of this section when combined with
actual experience to date.  Filings of rate revisions shall also
demonstrate that the anticipated loss ratio over the entire future
period for which the revised rates are computed to provide coverage
can be expected to meet the appropriate loss ratio standards.
   (3) For purposes of applying paragraph (1) of subdivision (a) and
paragraph (3) of subdivision (c) of Section 1358.15 only, contracts
issued as a result of solicitations of individuals through the mail
or by mass media advertising, including both print and broadcast
advertising, shall be deemed to be individual contracts.
   (b) (1) With respect to refund or credit calculations, an issuer
shall collect and file with the director by May 31 of each year the
data contained in the applicable reporting form required by the
director (NAIC Appendix A) for each type of coverage in a standard
Medicare supplement benefit plan.
   (2) If on the basis of the experience as reported the benchmark
ratio since inception (ratio 1) exceeds the adjusted experience ratio
since inception (ratio 3), then a refund or credit calculation is
required.  The refund calculation shall be done on a statewide basis
for each type of contract offered by the issuer.  For purposes of the
refund or credit calculation, experience on contracts issued within
the reporting year shall be excluded.
   (3) For the purposes of this section, with respect to contracts
advertised, solicited, or issued for delivery prior to January 1,
2001, the issuer shall make the refund or credit calculation
separately for all individual contracts, including all group
contracts subject to an individual loss ratio standard when issued,
combined and all other group contracts combined for experience after
January 1, 2001.  The first report pursuant to paragraph (1) shall be
due by May 31, 2003.
   (4) A refund or credit shall be made only when the benchmark loss
ratio exceeds the adjusted experience loss ratio and the amount to be
refunded or credited exceeds ten dollars ($10).  The refund shall
include interest from the end of the calendar year to the date of the
refund or credit at a rate specified by the secretary, but in no
event shall it be less than the average rate of interest for 13-week
Treasury notes.  A refund or credit against prepaid or periodic
charges due shall be made by September 30 following the experience
year upon which the refund or credit is based.
   (c) An issuer of Medicare supplement contracts shall file annually
its prepaid or periodic charges and supporting documentation
including ratios of incurred losses to earned prepaid or periodic
charges by contract duration for approval by the director in
accordance with the filing requirements and procedures prescribed by
the director.  The supporting documentation shall also demonstrate in
accordance with actuarial standards of practice using reasonable
assumptions that the appropriate loss ratio standards can be expected
to be met over the entire period for which charges are computed.
The demonstration shall exclude active life reserves.  An expected
third-year loss ratio that is greater than or equal to the applicable
percentage shall be demonstrated for contracts in force less than
three years.
   As soon as practicable, but prior to the effective date of
enhancements in Medicare benefits, every issuer of Medicare
supplement contracts shall file with the director, in accordance with
applicable filing procedures, all of the following:
   (1) (A) Appropriate prepaid or periodic charge adjustments
necessary to produce loss ratios as anticipated for the current
charge for the applicable contracts.  The supporting documents
necessary to justify the adjustment shall accompany the filing.
   (B) An issuer shall make prepaid or periodic charge adjustments
necessary to produce an expected loss ratio under the contract to
conform to minimum loss ratio standards for Medicare supplement
contracts and that are expected to result in a loss ratio at least as
great as that originally anticipated in the rates used to produce
current charges by the issuer for the Medicare supplement contracts.
No charge adjustment that would modify the loss ratio experience
under the contract other than the adjustments described in this
section shall be made with respect to a contract at any time other
than upon its renewal date or anniversary date.
   (C) If an issuer fails to make prepaid or periodic charge
adjustments acceptable to the director, the director may order charge
adjustments, refunds, or credits deemed necessary to achieve the
loss ratio required by this section.
   (2) Any appropriate contract amendments needed to accomplish the
Medicare supplement contract modifications necessary to eliminate
benefit duplications with Medicare.  The contract amendments shall
provide a clear description of the Medicare supplement benefits
provided by the contract.
   (d) (1) The director may conduct a public hearing to gather
information concerning a request by an issuer for an increase in a
rate for a contract form issued before or after the effective date of
January 1, 2001, if the experience of the form for the previous
reporting period is not in compliance with the applicable loss ratio
standard.  The determination of compliance is made without
consideration of any refund or credit for the reporting period.
Public notice of the hearing shall be furnished in a manner deemed
appropriate by the director.
   (2) The director may conduct a public hearing to gather
information if the experience of the form filed under paragraph (1)
of subdivision (b) for the previous reporting period is not in
compliance with the applicable loss ratio standard.
   The determination of compliance is made without consideration of
any refund or credit for the reporting period.  Public notice of the
hearing shall be furnished in a manner deemed appropriate by the
director.
   1358.145.  (a) The calculation of actual or expected loss ratios
shall be pursuant to the formula in subdivision (a) of Section
1358.14, and pursuant to definitions, procedures, and other
provisions as may be deemed by the director, with due consideration
of the circumstances of the particular issuer, to be fair,
reasonable, and consistent with the objectives of this chapter.
   (b) Each issuer shall submit to the department a copy of the
calculations for the actual or expected loss ratio as required by
Section 1358.14.  The calculations shall include the following data:
the actual loss ratio for the entire period in which the contract
has been in force, as well as for the immediate past three years and
for each year in which the contract has been in force, the scale of
prepaid or periodic charges for the loss ratio calculation period, a
description of all assumptions, the formula used to calculate gross
prepaid or periodic charges, the expected level of earned prepaid or
periodic charges in the loss ratio calculation period, and the
expected level of incurred claims for reimbursement, including paid
claims and incurred but not paid claims, in the loss ratio
calculation period.  The calculations shall be accompanied by an
actuarial certification, consisting of a signed declaration of an
actuary who is a member in good standing of the American Academy of
Actuaries in which the actuary states that the assumptions used in
calculating the expected loss ratio are appropriate and reasonable,
taking into account that the calculations are in accordance with the
provisions of subdivision (a) and the provisions referred to therein.
  In addition, the director may require the issuer to submit
actuarial certification, as described above, by one or more
unaffiliated actuaries acceptable to the director.
   (c) Notwithstanding the calculations required by subdivision (b),
contracts shall be deemed to comply with the loss ratio standards if,
and shall be deemed not to comply with the loss standards unless:
(1) for the most recent year, the ratio of the incurred losses to
earned prepaid charges for contracts that have been in force for
three years or more is greater than or equal to the applicable
percentages contained in this section; and (2) the expected losses in
relation to charges over the entire period for which the contract is
rated comply with the requirements of this section.  An expected
third-year loss ratio that is greater than or equal to the applicable
percentage shall be demonstrated for contracts in force less than
three years.
   1358.146.  The following format shall be used for reporting loss
ratio experience:
MEDICARE SUPPLEMENT
HEALTH CARE SERVICE PLAN
CONTRACT EXPERIENCE EXHIBIT
For the year ended December 31, 20__.
For the State of California.
Of the ____ health care service plan.
Address (City, State, and Zip Code) ____
Person Completing this Exhibit ____
To be filed by June 30th following the filing under Section 1358.14
of the Health and Safety Code.


                                        Costs for Health Care
Services

______________________________

                     Prepaid or                        Percentage
                      Periodic                         of Prepaid
                      Charges                          or Periodic
Classification        Earned           Amount        Charges Earned
----------------------------------------------------------------------
-
Experience on
Individual Plan
Contracts

1. Contracts issued
   through 20__

   Reporting State
___________________________________________________
   Nationwide
________________________________________________________

2. Contracts issued
   after 20__

   Reporting State
___________________________________________________
   Nationwide
________________________________________________________

Experience on Group
Plan Contracts

1. Contracts Issued
   through 20__

   Reporting State
___________________________________________________
   Nationwide
________________________________________________________

2. Contracts Issued
   after 20__

   Reporting State
___________________________________________________
   Nationwide
________________________________________________________


The undersigned officer hereby certifies that the company named
above has complied with the requirements contained in the federal
Omnibus Budget Reconciliation Act of 1987, Section 4081.
   Signature
_________________________________________________________
   Title and name (please type)
______________________________________

      INSTRUCTIONS FOR COMPLETING MEDICARE SUPPLEMENT HEALTH CARE
SERVICE PLAN CONTRACT EXPERIENCE EXHIBIT

   1. Experience on plan contracts issued more than three years prior
to the reporting year should be shown separately as indicated on the
form.  For example, for the reporting year ended 12/31/88 (filed on
June 30, 1989), experience on plan contracts issued in 1985 and prior
should be shown separately from that of plan contracts issued in
1986 and later.  For group coverage, the year of issue should be
based on when the contract was issued if available;  otherwise use
the master plan contract year of issue.
   2. Allocation of reserves on a state-by-state basis should be on
sound actuarial principles and be consistent from year to year.
   3. Membership or plan contract fees, if any, constitute, and
should be included with, prepaid or periodic charges earned.  Earned
prepaid or periodic charges may be shown on an annual basis net of
loadings for nonannual modes.
                                                 4. Mass marketing
group coverage subject to individual loss ratio standards should be
included with individual plan contracts.
   5. Any dividends paid to subscribers should be included with costs
for health care.
   6. Neither costs for health care services nor earned prepaid or
periodic charges should be adjusted for changes in plan contract
(additional) reserves.
      DEFINITIONS
      For purposes of this form:
   1. "Costs for health care services" means payment for health care
services plus the increase in claim reserves.  Claim reserves include
only those unpaid liabilities for claims that have already been
incurred.  Costs for health care services in this exhibit do not
include plan contract additional reserves.

   1358.15.  (a) An issuer shall not advertise, solicit, or issue for
delivery a Medicare supplement contract to a resident of this state
unless the contract has been filed with and approved by the director
in accordance with filing requirements and procedures prescribed by
the director.  Until January 1, 2001, or 90 days after approval of
Medicare supplement contracts submitted for approval pursuant to this
section, whichever is later, issuers may continue to offer and
market previously approved Medicare supplement contracts.
   (b) An issuer shall not use or change prepaid or periodic charges
for a Medicare supplement contract unless the charges and supporting
documentation have been filed with and approved by the director in
accordance with the filing requirements and procedures prescribed by
the director.
   (c) (1) Except as provided in paragraph (2), an issuer shall not
file for approval more than one contract of each type for each
standard Medicare supplement benefit plan.
   (2) An issuer may offer, with the approval of the director, up to
four additional contracts of the same type for the same standard
Medicare supplement benefit plan, one for each of the following
cases:
   (A) The inclusion of new or innovative benefits.
   (B) The addition of either direct response or agent marketing
methods.
   (C) The addition of either guaranteed issue or underwritten
coverage.
   (D) The offering of coverage to individuals eligible for Medicare
by reason of disability.
   (3) For the purposes of this section, a "type" means an individual
contract, a group contract, an individual Medicare Select contract,
or a group Medicare Select contract.
   (d) (1) Except as provided in subdivision (a), an issuer shall
continue to make available for purchase any contract issued after
January 1, 2001, that has been approved by the director.  A contract
shall not be considered to be available for purchase unless the
issuer has actively offered it for sale in the previous 12 months.
   (A) An issuer may discontinue the availability of a contract if
the issuer provides to the director in writing its decision at least
30 days prior to discontinuing the availability of the form of the
contract.  After receipt of the notice by the director, the issuer
shall no longer offer for sale the contract in this state.
   (B) An issuer that discontinues the availability of a contract
pursuant to subparagraph (A) shall not file for approval a new
contract of the same type for the same standard Medicare supplement
benefit plan as the discontinued contract for a period of five years
after the issuer provides notice to the director of the
discontinuance.  The period of discontinuance may be reduced if the
director determines that a shorter period is appropriate.
   (2) The sale or other transfer of Medicare supplement business to
another issuer shall be considered a discontinuance for the purposes
of this section.
   (3) A change in the rating structure or methodology shall be
considered a discontinuance under paragraph (1) unless the issuer
complies with the following requirements:
   (A) The issuer provides an actuarial memorandum, in a form and
manner prescribed by the director, describing the manner in which the
revised rating methodology and resultant rates differ from the
existing rating methodology and existing rates.
   (B) The issuer does not subsequently put into effect a change of
rates or rating factors that would cause the percentage differential
between the discontinued and subsequent rates as described in the
actuarial memorandum to change.  The director may approve a change to
the differential which is in the public interest.
   (e) (1) Except as provided in paragraph (2), the experience of all
contracts of the same type in a standard Medicare supplement benefit
plan shall be combined for purposes of the refund or credit
calculation prescribed in Section 1358.13.
   (2) Contracts assumed under an assumption reinsurance agreement
shall not be combined with the experience of other contracts for
purposes of the refund or credit calculation.
   (f) A Medicare supplement contract shall be deemed not to be fair,
just, or consistent with the objectives of the this chapter at all
times, and shall not be advertised, solicited, or issued for delivery
at any time, except during that period of time, if any, beginning
with the date of receipt by the plan of notification by the director
that the provisions of the contract are deemed to be fair, just, and
consistent with the objectives of this chapter, and ending with the
earlier to occur of the events indicated in subdivision (g).
   (g) The period of time indicated in subdivision (f) shall
terminate at the earlier to occur of (1) receipt by the plan of
written revocation by the director of the immediate past notification
referred to in subdivision (f) specifying the basis for the
revocation, (2) the last day of the prepaid or periodic charge
calculation period, that in no event may exceed one year, or (3) June
30, of the next succeeding calendar year.
   (h) An issuer shall secure the director's review of a contract
subject to this article by submitting, not less than 30 days prior to
any proposed advertising or other use of the contract not already
protected by a currently effective notice under subdivision (f), the
following for the director's review:
   (1) A copy of the contract.
   (2) A copy of the disclosure form.
   (3) A representation that the contract complies with the
provisions of this chapter and the rules adopted thereunder.
   (4) A completed copy of the "Medicare Supplement Health Care
Service Plan Contract Experience Exhibit" set forth in Section
1358.145.
   (5) A copy of the calculations for the actual or expected loss
ratio.
   (6) Supporting data used in calculating the actual or expected
loss ratio as indicated in Section 1358.14.
   (7) An actuarial certification, as specified in Section 1358.14,
of the loss ratio computations.
   (8) If required by the director, actuarial certification, as
specified in Section 1358.14, of the loss ratio computations by one
or more unaffiliated actuaries acceptable to the director.
   (9) An undertaking by the issuer to notify the subscribers in
writing within 60 days of decertification, if the contract is
identified as a certified contract at the time of sale and later
decertified.
   (10) A signed statement of the president of the issuer or other
officer of the issuer designated by that person attesting that the
information submitted for review is accurate and complete and does
not misrepresent any material fact.
   (i) An issuer that submits information pursuant to subdivision (h)
shall provide any additional information as may be requested by the
director to enable the director to conclude that the contract
complies with the provisions of this chapter and rules adopted
thereunder.
   (j) For the purposes of this section, the term "decertified," as
applied to a contract, means that the director by written notice has
found that the contract no longer complies with the provisions of
this chapter and the rules adopted thereunder and has revoked the
prior authorization to display on the contract the emblem indicating
certification.
   (k) Benefits designed to cover cost-sharing amounts under Medicare
will be changed automatically to coincide with any changes in the
applicable Medicare deductible amount and copayment percentage
factors and the amount of prepaid charges may be modified, as
indicated in paragraph (6) of subdivision (a) of Section 1300.67.4 of
the California Code of Regulations, to correspond with those
changes.
   1358.16.  (a) An issuer or other entity may provide commission or
other compensation to a solicitor or other representative for the
sale of a Medicare supplement contract only if the first year
commission or other first year compensation is no more than 200
percent of the commission or other compensation paid for selling or
servicing the contract in the second year or period.
   (b) The commission or other compensation provided in subsequent
renewal years shall be the same as that provided in the second year
or period and shall be provided for no fewer than five renewal years.

   (c) If coverage is replaced, no issuer shall provide compensation
to a solicitor or solicitor firm, and no solicitor or solicitor firm
shall receive compensation, in a greater amount than the renewal
compensation for the replaced coverage.
   (d) For purposes of this section, "commission" or "compensation"
includes pecuniary or nonpecuniary remuneration of any kind relating
to the sale or renewal of the contract, including, but not limited
to, bonuses, gifts, prizes, awards, and finders' fees.
   1358.17.  (a) (1) Medicare supplement contracts shall include a
renewal or continuation provision.  The language or specifications of
the provision shall be consistent with subdivision (a) of Section
1365 and the rules adopted thereunder.  The provision shall be
appropriately captioned and shall appear on the first page of the
contract, and shall include any reservation by the issuer of the
right to change prepaid or periodic charges and any automatic renewal
increases based on the enrollee's age.
   (2) The contract shall contain the provisions required to be set
forth by Section 1300.67.4 of the California Code of Regulations.
   (b) (1) Except for contract amendments by which the issuer
effectuates a request made in writing by the enrollee, exercises a
specifically reserved right under a Medicare supplement contract, or
is required to reduce or eliminate benefits to avoid duplication of
Medicare benefits, all amendments to a Medicare supplement contract
after the date of issue or upon reinstatement or renewal that reduce
or eliminate benefits or coverage in the contract shall require a
signed acceptance by the subscriber.  After the date of contract
issue, any amendment that increases benefits or coverage with a
concomitant increase in prepaid or periodic charges during the
contract term shall be agreed to in writing signed by the subscriber,
unless the benefits are required by the minimum standards for
Medicare supplement contracts, or if the increased benefits or
coverage is required by law.  Where a separate additional charge is
made for benefits provided in connection with contract amendments,
the charge shall be set forth in the contract.
   (2) An issuer shall not in any way reduce or eliminate any benefit
or coverage under a Medicare supplement contract at any time after
the date of entering the contract, including dates of reinstatement
or renewal, unless and until the change is voluntarily agreed to in
writing signed by the subscriber or enrollee, or is required to
reduce or eliminate benefits to avoid duplication of Medicare
benefits.  The issuer shall not increase benefits or coverage with a
concomitant increase in prepaid or periodic charges during the term
of the contract unless and until the change is voluntarily agreed to
in writing signed by the subscriber or enrollee or unless the
increased benefits or coverage is required by law or regulation.
   (c) Medicare supplement contracts shall not provide for the
payment of benefits based on standards described as "usual and
customary," "reasonable and customary," or words of similar import.
   (d) If a Medicare supplement contract contains any limitations
with respect to preexisting conditions, those limitations shall
appear as a separate paragraph of the contract and be labeled as
"Preexisting Condition Limitations."
   (e) (1) Medicare supplement contracts shall have a notice
prominently printed in no less than 10-point uppercase type, on the
cover page of the contract or attached thereto stating that the
applicant shall have the right to return the contract within 30 days
of its receipt via regular mail, and to have any charges refunded in
a timely manner if, after examination of the contract, the covered
person is not satisfied for any reason.  The return shall void the
contract from the beginning, and the parties shall be in the same
position as if no contract had been issued.
   (2) For purposes of this section, a timely manner shall be no
later than 30 days after the issuer receives the returned contract.
   (3) If the issuer fails to refund all prepaid or periodic charges
paid in a timely manner, then the applicant shall receive interest on
the paid charges at the legal rate of interest on judgments as
provided in Section 685.010 of the Code of Civil Procedure.  The
interest shall be paid from the date the issuer received the returned
contract.
   (f) (1) Issuers of health care service plan contracts that provide
hospital or medical expense coverage on an expense incurred or
indemnity basis to persons eligible for Medicare shall provide to
those applicants a guide to health insurance for people with Medicare
in the form developed jointly by the National Association of
Insurance Commissioners and the Health Care Financing Administration
and in a type size no smaller than 12-point type.  Delivery of the
guide shall be made whether or not the contracts are advertised,
solicited, or issued for delivery as Medicare supplement contracts as
defined  in this article.  Except in the case of direct response
issuers, delivery of the guide shall be made to the applicant at the
time of application, and acknowledgment of receipt of the guide shall
be obtained by the issuer.  Direct response issuers shall deliver
the guide to the applicant upon request, but not later than at the
time the contract is delivered.
   (2) For the purposes of this section, "form" means the language,
format, type size, type proportional spacing, bold character, and
line spacing.
   (g) As soon as practicable, but no later than 30 days prior to the
annual effective date of any Medicare benefit changes, an issuer
shall notify its enrollees and subscribers of modifications it has
made to Medicare supplement contracts in a format acceptable to the
director.  The notice shall include both of the following:
   (1) A description of revisions to the Medicare program and a
description of each modification made to the coverage provided under
the Medicare supplement contract.
   (2) Inform each enrollee as to when any adjustment in prepaid or
periodic charges is to be made due to changes in Medicare.
   (h) The notice of benefit modifications and any adjustments of
prepaid or periodic charges shall be in outline form and in clear and
simple terms so as to facilitate comprehension.
   (i) The notices shall not contain or be accompanied by any
solicitation.
   (j) (1) Issuers shall provide an outline of coverage to all
applicants at the time application is presented to the prospective
applicant and, except for direct response policies, shall obtain an
acknowledgment of receipt of the outline from the applicant.  If an
outline of coverage is provided at the time of application and the
Medicare supplement contract is issued on a basis which would require
revision of the outline, a substitute outline of coverage properly
describing the contract shall accompany the contract when it is
delivered and contain the following statement, in no less than
12-point type, immediately above the company name:

   "NOTICE:  Read this outline of coverage carefully.  It is not
identical to the outline of coverage provided upon application and
the coverage originally applied for has not been issued."

   (2) The outline of coverage provided to applicants pursuant to
this section consists of four parts:  a cover page, information about
prepaid or periodic charges, disclosure pages, and charts displaying
the features of each benefit plan offered by the issuer.  The
outline of coverage shall be in the language and format prescribed
below in no less than 12-point type.  All benefit plans A-J shall be
shown on the cover page, and the plans that are offered by the issuer
shall be prominently identified.  Information about prepaid or
periodic charges for plans that are offered shall be shown on the
cover page or immediately following the cover page and shall be
prominently displayed.  The charge and mode shall be stated for all
plans that are offered to the prospective applicant.  All possible
charges for the prospective applicant shall be illustrated.
   (3) The disclosure pages shall be in the language and format
described below in no less than 12-point type.
      INFORMATION ABOUT PREPAID OR PERIODIC CHARGES

   (Insert plan's name) can only raise your charges if it raises the
charge for all contracts like yours in this state.  (If the charge is
based on the increasing age of the enrollee, include information
specifying when charges will change.)
      DISCLOSURES

   Use this outline to compare benefits and charges among policies.
      READ YOUR POLICY VERY CAREFULLY

   This is only an outline describing the most important features of
your Medicare supplement plan contract.  This is not the plan
contract and only the actual contract provisions will control.  You
must read the contract itself to understand all of the rights and
duties of both you and (insert the health care service plan's name).

      RIGHT TO RETURN POLICY

   If you find that you are not satisfied with your contract, you may
return it to (insert plan's address).  If you send the contract back
to us within 30 days after you receive it, we will treat the
contract as if it had never been issued and return all of your
payments.
      POLICY REPLACEMENT

   If you are replacing other health coverage, do NOT cancel it until
you have actually received your new contract and are sure you want
to keep it.
      NOTICE

   This contract may not fully cover all of your medical costs.
Neither (insert the health care service plan's name) nor its agents
are connected with Medicare.
   This outline of coverage does not give all the details of Medicare
coverage.  Contact your local social security office or consult "The
Medicare Handbook" for further details and limitations applicable to
Medicare.
      COMPLETE ANSWERS ARE VERY IMPORTANT

   When you fill out the application for the new contract, be sure to
answer truthfully and completely all questions about your medical
and health history.  The company may cancel your contract and refuse
to pay any claims if you leave out or falsify important medical
information.  (If the contract is guaranteed issue, this paragraph
need not appear.)  Review the application carefully before you sign
it.  Be certain that all information has been properly recorded. (The
charts displaying the features of each benefit plan offered by the
issuer shall use the uniform format and language shown in the charts
set forth in Section 17 of the Model Regulation to Implement the NAIC
Medicare Supplement Insurance Minimum Standards Model Act, as most
recently adopted by the National Association of Insurance
Commissioners.  No more than four benefit plans may be shown on one
chart.  For purposes of illustration, charts for each benefit plan
are set forth below.  An issuer may use additional benefit plan
designations on these charts.)
   (Include an explanation of any innovative benefits on the cover
page and in the chart, in a manner approved by the director.)

   (k) Notwithstanding Section 1300.63.2 of Title 10 of the
California Code of Regulations, no issuer shall combine the evidence
of coverage and disclosure form into a single document relating to a
contract that supplements Medicare, or is advertised or represented
as a supplement to Medicare, with hospital or medical coverage.
   (l) The director may adopt regulations to implement this  article,
including, but not limited to, regulations that specify the required
information to be contained in the outline of coverage provided to
applicants pursuant to this section, including the format of tables,
charts, and other information.
   (m) (1) Any health care service plan contract, other than a
Medicare supplement contract, a contract issued pursuant to a
contract under Section 1876 of the federal Social Security Act (42
U.S.C.A. Sec. 1395 et seq.), a disability income policy, or any other
contract identified in subdivision (b) of Section 1358.3, issued for
delivery in this state to persons eligible for Medicare, shall
notify enrollees under the contract that the contract is not a
Medicare supplement contract.  The notice shall either be printed or
attached to the first page of the outline of coverage delivered to
enrollees under the contract, or if no outline of coverage is
delivered, to the first page of the contract delivered to enrollees.
The notice shall be in no less than 12-point type and shall contain
the following language:

   "THIS CONTRACT IS NOT A MEDICARE SUPPLEMENT.  If you are eligible
for Medicare, review the Guide to Health Insurance for People with
Medicare available from the company."

   (2) Applications provided to persons eligible for Medicare for the
health insurance contracts described in paragraph (1) shall disclose
the extent to which the contract duplicates Medicare in a manner
required by the director.  The disclosure statement shall be provided
as a part of, or together with, the application for the contract.
   (n) A Medicare supplement contract that does not cover custodial
care shall, on the cover page of the outline of coverages, contain
the following statement in uppercase type:  "THIS POLICY DOES NOT
COVER CUSTODIAL CARE IN A SKILLED NURSING CARE FACILITY."
   1358.18.  In the interest of full and fair disclosure, and to
assure the availability of necessary consumer information to
potential subscribers or enrollees not possessing a special knowledge
of Medicare, health care service plans, or Medicare supplement
contracts, an issuer shall comply with the following provisions:
   (a) Application forms shall include the following questions
designed to elicit information as to whether, as of the date of the
application, the applicant has another Medicare supplement or other
health insurance policy or certificate or plan contract in force or
whether a Medicare supplement contract is intended to replace any
other disability policy or certificate, or plan contract, presently
in force.  A supplementary application or other form to be signed by
the applicant and solicitor containing those questions and statements
may be used.
      "(Statements)

   (1) You do not need more than one Medicare supplement policy or
contract.
   (2) If you purchase this contract, you may want to evaluate your
existing health coverage and decide if you need multiple coverages.
   (3) You may be eligible for benefits under Medi-Cal or medicaid
and may not need a Medicare supplement contract.
   (4) The benefits and premiums under your Medicare supplement
contract can be suspended, if requested, during your entitlement to
benefits under Medi-Cal or medicaid for 24 months.  You must request
this suspension within 90 days of becoming eligible for Medi-Cal or
medicaid.  If you are no longer entitled to Medi-Cal or medicaid,
your contract will be reinstituted if requested within 90 days of
losing Medi-Cal or medicaid eligibility.
   (5) Counseling services are available in your state to provide
advice concerning your purchase of Medicare supplement coverage and
concerning medical assistance through the Medi-Cal or medicaid
program, including benefits as a qualified Medicare beneficiary (QMB)
and a specified low-income Medicare beneficiary (SLMB).  Information
regarding counseling services may be obtained from the California
Department of Aging.
      (Questions)

   To the best of your knowledge,
   (1) Do you have another Medicare supplement policy or certificate,
or contract, in force?
   (a) If so, with which company?
   (b) If so, do you intend to replace your current Medicare
supplement policy or contract with this contract?
   (2) Do you have any other health insurance coverage that provides
benefits similar to this Medicare supplement contract?
   (a) If so, with which company?
   (b) What kind of coverage?
   (3) Are you covered for medical assistance through the Medi-Cal or
medicaid program:
   (a) As a specified low-income Medicare beneficiary (SLMB)?
   (b) As a qualified Medicare beneficiary (QMB)?
   (c) For other Medi-Cal or medicaid medical benefits?"

   (b) Solicitors shall list any other health insurance policies or
plan contracts they have sold to the applicant as follows:
   (1) List policies and contracts sold that are still in force.
   (2) List policies and contracts sold in the past five years that
are no longer in force.
   (c) An issuer issuing Medicare supplement contracts without a
solicitor or solicitor firm (a direct response issuer) shall return
to the applicant, upon delivery of the contract, a copy of the
application or supplemental forms, signed by the applicant and
acknowledged by the issuer.
   (d) Upon determining that a sale will involve replacement of
Medicare supplement coverage, any issuer, other than a direct
response issuer, or its agent, shall furnish the applicant, prior to
issuance for delivery of the  Medicare supplement contract, a notice
regarding replacement of Medicare supplement coverage.  One copy of
the notice signed by the applicant and the agent, except where the
coverage is sold without an agent, shall be provided to the applicant
and an additional signed copy shall be retained by the issuer.  A
direct response issuer shall deliver to the applicant at the time of
the issuance of the contract the notice regarding replacement of
Medicare supplement coverage.
   (e) The notice required by subdivision (d) for an issuer shall be
provided in substantially the following form in no less than 10-point
type:
      NOTICE TO APPLICANT REGARDING REPLACEMENT OF MEDICARE
SUPPLEMENT COVERAGE
(Company name and address)
SAVE THIS NOTICE! IT MAY BE IMPORTANT TO YOU IN THE FUTURE

   According to (your application) (information you have furnished),
you intend to lapse or otherwise terminate an existing Medicare
supplement policy or contract and replace it with a contract to be
issued by (Plan Name).  Your contract to be issued by (Plan Name)
will provide 30 days within which you may decide without cost whether
you desire to keep the contract.  You should review this new
coverage carefully.  Compare it with all accident and sickness
coverage you now have.  Terminate your present policy or contract
only if, after due consideration, you find that purchase of this
Medicare supplement coverage is a wise decision.
STATEMENT TO APPLICANT BY PLAN, SOLICITOR, SOLICITOR FIRM, OR OTHER
REPRESENTATIVE:

   (1) I have reviewed your current medical or health coverage.  The
replacement of coverage involved in this transaction does not
duplicate coverage, to the best of my knowledge.  The replacement
contract is being purchased for the following reason (check one):
__Additional benefits.
__No change in benefits, but lower premiums or charges.
__Fewer benefits and lower premiums or charges.
__Other.  (please specify) ________

   (2) You may not be immediately eligible for full coverage under
the new contract.  This could result in denial or delay of a claim
for benefits under the new contract, whereas a similar claim might
have been payable under your present policy or contract.
   (3) State law provides that your replacement Medicare supplement
contract may not contain new preexisting conditions, waiting periods,
elimination periods, or probationary periods.  The plan will waive
any time periods applicable to preexisting conditions, waiting
periods, elimination periods, or probationary periods in the new
coverage for similar benefits to the extent that time was spent
(depleted) under the original contract.
   (4) If you still wish to terminate your present policy or contract
and replace it with new coverage, be certain to truthfully and
completely answer any and all questions on the application concerning
your medical and health history.  Failure to include all material
medical information on an application requesting that information may
provide a basis for the plan to deny any future claims and to refund
your prepaid or periodic payment as though your contract had never
been in force.  After the application has been completed and before
you sign it, review it carefully to be certain that all information
has been properly recorded.
   (5) Do not cancel your present Medicare supplement coverage until
you have received your new contract and are sure you want to keep it.




_____________________________________________________________________

     (Signature of Solicitor, Solicitor Firm, or Other
Representative)
       (Typed Name and Address of Plan, Solicitor, or Solicitor Firm)


_____________________________________________________________________

                          (Applicant's Signature)

_____________________________________________________________________

                                  (Date)

   (f) The application form or other consumer information for persons
eligible for Medicare and used by an issuer shall contain as an
attachment a Medicare supplement buyer's guide in the form approved
by the director.  The application or other consumer information,
containing as an attachment the buyer's guide, shall be mailed or
delivered to each applicant applying for that coverage at or before
the time of application and, to establish compliance with this
subdivision, the issuer shall obtain an acknowledgment of receipt of
the attached buyer's guide from each applicant.  No issuer shall make
use of or otherwise disseminate any buyer's guide that does not
accurately outline current Medicare supplement benefits.  No issuer
shall be required to provide more than one copy of the buyer's guide
to any applicant.
   (g) An issuer may comply with the requirement of this section in
the case of group contracts by causing the subscriber (1) to
disseminate copies of the disclosure form containing as an attachment
the buyer's guide to all persons eligible under the group contract
at the time those persons are offered the Medicare supplement plan,
and (2) collecting and forwarding to the issuer an acknowledgment of
receipt of the disclosure form containing as an attachment the buyer'
s guide from each enrollee.
   1358.19.  An issuer shall provide a copy of any Medicare
supplement advertisement intended for use in this state whether
through written, radio, or television medium to the director for
review or approval.
   1358.20.  (a) An issuer, directly or through solicitors or other
representatives, shall do each of the following:
   (1) Establish marketing procedures to ensure that any comparison
of Medicare supplement coverage by its solicitors or other
representatives will be fair and accurate.
   (2) Establish marketing procedures to ensure that excessive
coverage is not sold or issued.
   (3) Display prominently by type, stamp, or other appropriate
means, on the first page of the outline of coverage and contract, the
following:

   "Notice to buyer:  This Medicare supplement contract may not cover
all of your medical expenses."

   (4) Inquire and otherwise make every reasonable effort to identify
whether a prospective applicant for a Medicare supplement contract
already has health care coverage and the types and amounts of that
coverage.
   (5) Establish auditable procedures for verifying compliance with
this subdivision.
   (b) In addition to the practices prohibited by this code or any
other law, the following acts and practices are prohibited:
   (1) Twisting, which means knowingly making any misleading
representation or incomplete or fraudulent comparison of any
coverages or issuers for the purpose of inducing or tending to
induce, any person to lapse, forfeit, surrender, terminate, retain,
pledge, assign, borrow on, or convert any coverage or to take out
coverage with another plan or insurer.
   (2) High pressure tactics, which means employing any method of
marketing having the effect of or tending to induce the purchase of
coverage through force, fright, threat, whether explicit or implied,
or undue pressure to purchase or recommend the purchase of coverage.

   (3) Cold lead advertising, which means making use directly or
indirectly of any method of marketing which fails to disclose in a
conspicuous manner that a purpose of the method of marketing is the
solicitation of coverage and that contact will be made by a health
care service plan or its representative.
   (c) The terms "Medicare supplement," "Medicare Wrap-Around" and
words of similar import shall not be used unless the contract is
issued in compliance with this article.  The term "Medigap" shall not
be used.
   1358.21.  (a) In recommending the purchase or replacement of any
Medicare supplement coverage, an issuer or its representative shall
make reasonable efforts to determine the appropriateness of a
recommended purchase or replacement.
   (b) Any sale of a Medicare supplement contract that will provide
an individual more than one Medicare supplement policy or
certificate, or contract, is prohibited.
   1358.22.  (a) On or before March 1 of each year, an issuer shall
report the following information for every individual resident of
this state for which the issuer has in force more than one Medicare
supplement contract:
   (1) Contract number.
   (2) Date of issuance.
   (b) The items set forth above shall be grouped by enrollee.
   1358.225.  (a) Every issuer shall, by June 30 of each year, file
with the director a list of its Medicare supplement contracts offered
or issued or outstanding in this state as of the end of the previous
calendar year.
   (b) The list shall identify the filing issuer by name and address,
shall identify each type of contract it offers by name and form
number, if one is used, and shall differentiate between contracts
filed with and approved by the director in years prior to the
previous calendar year, and those  filed and approved in the previous
calendar year.
   (c) The list shall specifically identify all of the following:
   (1) Contracts that are issued and outstanding in this state but
are no longer offered for sale.
   (2) Contracts that, for any reason, were not filed and approved by
the director.
   (3) Contracts for which the director's approval was withdrawn
within the previous calendar year.
   (d) The director shall, on or before the first day of  September
of each year provide the secretary with a list identifying each
contract by name and address and the information required to be
submitted by this section.
   1358.23.  (a) If a Medicare supplement contract replaces another
Medicare supplement policy or certificate, or contract, the replacing
issuer shall waive any time periods applicable to preexisting
conditions, waiting periods, elimination periods, and probationary
periods in the new Medicare supplement contract for similar benefits
to the extent that time was spent under the original policy or
certificate, or contract.
   (b) If a Medicare supplement contract replaces another Medicare
supplement policy or certificate, or contract, that has been in
effect for at least six months, the replacing contract shall not
provide any time period applicable to preexisting conditions, waiting
periods, elimination periods and probationary periods for benefits
similar to those contained in the original policy or certificate, or
contract.
  SEC. 3.  Article 6 (commencing with Section 10192.05) of Chapter 1
of Part 2 of Division 2 of the Insurance Code is repealed.
  SEC. 4.  Article 6 (commencing with Section 10192.1) is added to
Chapter 1 of Part 2 of Division 2 of the Insurance Code, to read:

      Article 6.  Medicare Supplement Policies

   10192.1.  All Medicare supplement policies and certificates shall
comply with the provisions of subdivision (b) of Section 10291.5 and
Chapter 7 (commencing with Section 10600) of Part 2 of Division 2,
regardless of the situs of the contract.
   10192.2.  The purpose of this article is to provide for the
reasonable standardization of coverage and simplification of terms
and benefits of Medicare supplement policies, to facilitate public
understanding and comparison of those policies, to eliminate
provisions contained in those policies that may be misleading or
confusing in connection with the purchase of the policies or with the
settlement of claims, and to provide for full disclosures in the
sale of Medicare supplement insurance policies to persons eligible
for Medicare.
   10192.3.  (a) Except as otherwise provided in this section or in
Sections 10192.7, 10192.12, 10192.13, 10192.16, and 10192.21, this
article shall apply to all Medicare supplement policies advertised,
solicited, or issued for delivery in this state on or  after January
1, 2001, and to all certificates delivered in this state under a
group Medicare supplement master policy agreement that have been
advertised, solicited, or issued for delivery in this state on or
after that date.
   (b) This article shall not apply to a policy or contract of one or
more employers or labor organizations, or of the trustees of a fund
established by one or more employers or labor organizations, or
combination thereof, for employees or former employees, or a
combination thereof, or for members or former members, or a
combination thereof, of the labor organizations.
   (c) This article shall not apply to Medicare supplement policies
subject to Article 3.5 (commencing with Section 1358.1) of Chapter
2.2 of Division 2 of the Health and Safety Code.
   (d) The commissioner may, from time to time, promulgate
regulations to implement this article.
   10192.4.  For the purposes of this article, the following terms
have the following meanings:
   (a) "Applicant" means:
   (1) The person who seeks to contract for insurance benefits, in
the case of an individual Medicare supplement policy.
   (2) The proposed certificate holder, in the case of a group
Medicare supplement policy.
   (b) "Bankruptcy" means that situation in which a Medicare+Choice
organization that is not an issuer has filed, or has had filed
against it, a petition for declaration of bankruptcy and has ceased
doing business in the state.
   (c) "Certificate" means a certificate issued for delivery in this
state under a group Medicare supplement policy.
   (d) "Certificate form" means the form on which the certificate is
issued for delivery by the issuer.
   (e) "Continuous period of creditable coverage" means the period
during which an individual was covered by creditable coverage, if
during the period of the coverage the individual had no breaks in
coverage greater than 63 days.
   (f) (1) "Creditable coverage" means, with respect to an
individual, coverage of the individual provided under any of the
following:
   (A) Any individual or group contract, policy, certificate, or
program that is written or administered by a health care service
plan, disability insurer, fraternal benefits society, self-insured
employer plan, or any other entity, in this state or elsewhere, and
that arranges or provides medical, hospital, and surgical coverage
not designed to supplement other private or governmental plans.  The
term includes continuation or conversion coverage.
   (B) Part A or B of Title XVIII of the federal Social Security Act
(Medicare).
   (C) Title XIX of the federal Social Security Act (medicaid), other
than coverage consisting solely of benefits under Section 1928 of
that act.
   (D) Chapter 55 of Title 10 of the United States Code (CHAMPUS).
   (E) A medical care program of the Indian Health Service or of a
tribal organization.
   (F) A state health benefits risk pool.
   (G) A health plan offered under Chapter 89 of Title 5 of the
United States Code (Federal Employees Health Benefits Program).
   (H) A public health plan as defined in federal regulations
authorized by Section 2701(c)(1)(I) of the federal Public Health
Service Act, as amended by Public Law 104-191, the federal Health
Insurance Portability and Accountability Act of 1996.
   (I) A health benefit plan under Section 5(e) of the federal Peace
Corps Act (Section 2504(e) of Title 22 of the United States Code).
   (J) Any other publicly sponsored program, provided in this state
or elsewhere, of medical, hospital, and surgical care.
   (K) Any other creditable coverage as defined by subsection (c) of
Section 2701 of Title XXVII of the federal Public Health Services Act
(42 U.S.C. Sec.  300gg(c)).
   (2) "Creditable coverage" shall not include one or more, or any
combination of, the following:
   (A) Coverage only for accident or disability income insurance, or
any combination thereof.
   (B) Coverage issued as a supplement to liability insurance.
   (C) Liability insurance, including general liability insurance and
automobile liability insurance.
   (D) Workers' compensation or similar insurance.
   (E) Automobile medical payment insurance.
   (F) Credit-only insurance.
   (G) Coverage for onsite medical clinics.
   (H) Other similar insurance coverage, specified in federal
regulations, under which benefits for medical care are secondary or
incidental to other insurance benefits.
   (3) "Creditable coverage" shall not include the following benefits
if they are provided under a separate policy, certificate, or
contract of insurance or are otherwise not an integral part of the
plan:
   (A) Limited scope dental or vision benefits.
   (B) Benefits for long-term care, nursing home care, home health
care, community-based care, or any combination thereof.
   (C) Other similar, limited benefits as are specified in federal
regulations.
   (4) "Creditable coverage" shall not include the following benefits
if offered as independent, noncoordinated benefits:
   (A) Coverage only for a specified disease or illness.
   (B) Hospital indemnity or other fixed indemnity insurance.
   (5) "Creditable coverage" shall not include the following if
offered as a separate policy, certificate, or contract of insurance:

   (A) Medicare supplemental health insurance as defined under
Section 1882(g)(1) of the federal Social Security Act.
   (B) Coverage supplemental to the coverage provided under Chapter
55 of Title 10 of the United States Code.
   (C) Similar supplemental coverage provided to coverage under a
group health plan.
   (g) "Employee welfare benefit plan" means a plan, fund, or program
of employee benefits as defined in Section 1002 of Title 29 of the
United States Code (Employee Retirement Income Security Act).
   (h) "Insolvency" means when an issuer, licensed to transact the
business of insurance in this state, has had a final order of
liquidation entered against it with a finding of insolvency by a
court of competent jurisdiction in the issuer's state of domicile.
   (i) "Issuer" includes insurance companies, fraternal benefit
societies, and any other entity delivering, or issuing for delivery,
Medicare supplement policies or certificates in this state, except
entities subject to Article 3.5 (commencing with Section 1358) of
Chapter 2.2 of Division 2 of the Health and Safety Code.
   (j) "Medicare" means the Health Insurance for the Aged Act, Title
XVIII of the Social Security Amendments of 1965, as amended.
   (k) "Medicare+Choice Plan" means a plan of coverage for health
benefits under Medicare Part C and includes:
   (1) Coordinated care plans that provide health care services,
including, but not limited to, health care service plans (with or
without a point-of-service option), plans offered by
provider-sponsored organizations, and preferred provider
organizations plans.
   (2) Medical savings account plans coupled with a contribution into
a Medicare+Choice medical savings account.
   (3) Medicare+Choice private fee-for-service plans.
   (l) "Medicare supplement policy" means a group or individual
policy of disability insurance, other than a policy issued pursuant
to a contract under Section 1876 of the federal Social Security Act
(42 U.S.C.A.  Section 1395mm) or an issued policy under a
demonstration project specified in Section 1395ss(g)(1) of Title 42
of the United States Code, which is advertised, marketed, or designed
primarily as a supplement to reimbursements under Medicare for the
hospital, medical, or surgical expenses of persons eligible for
Medicare.
   (m) "Policy form" means the form on which the policy is issued for
delivery by the issuer.
   (n) "Secretary" means the Secretary of the United States
Department of Health and Human Services.
   10192.5.  A policy or certificate shall not be advertised,
solicited, or issued for delivery as a Medicare  supplement policy or
certificate unless the policy or certificate contains definitions or
terms that conform to the requirements of this section.
   (a) (1) "Accident," "accidental injury," or "accidental means"
shall be defined to employ "result" language and shall not include
words that establish an accidental means test or use words such as
"external, violent, visible wounds" or other similar words of
description or characterization.
   (2) The definition shall not be more restrictive than the
following:  "injury or injuries for which benefits are provided means
accidental bodily injury sustained by the insured person that is the
direct result of an accident, independent of disease or bodily
infirmity or any other cause, and occurs while insurance coverage is
in force."
   (3) The definition may provide that injuries shall not include
injuries for which benefits are provided or available under any
workers' compensation, employer's liability, or similar law, unless
prohibited by law.
   (b) "Benefit period" or "Medicare benefit period" shall not be
defined more restrictively than as defined in the Medicare program.
   (c) "Convalescent nursing home," "extended care facility," or
"skilled nursing facility" shall not be defined more restrictively
than as defined in the Medicare program.
   (d) (1) "Health care expenses" means expenses of health
maintenance organizations associated with the delivery of health care
services, which expenses are analogous to incurred losses of
insurers.
   (2) "Health care expenses" shall not include any of the following:

   (A) Home office and overhead costs.
   (B) Advertising costs.
   (C) Commissions and other acquisition costs.
   (D) Taxes.
   (E) Capital costs.
   (F) Administrative costs.
   (G) Claims processing costs.
   (e) "Hospital" may be defined in relation to its status,
facilities, and available services or to reflect its accreditation by
the Joint Commission on Accreditation of Hospitals, but not more
restrictively than as defined in the Medicare program.
   (f) "Medicare" shall be defined in the policy and certificate.
"Medicare" may be substantially defined as "The Health Insurance for
the Aged Act, Title XVIII of the Social Security Amendments of 1965,
as amended," or "Title I, Part I of Public Law 89-97, as enacted by
the 89th Congress and popularly known as the Health Insurance for the
Aged Act, as amended," or words of similar import.
   (g) "Medicare eligible expenses" shall mean expenses of the kinds
covered by Medicare, to the extent recognized as reasonable and
medically necessary by Medicare.
   (h) "Physician" shall not be defined more restrictively than as
defined in the Medicare program.
   (i) (1) "Sickness" shall not be defined more restrictively than as
follows:  "sickness means illness or disease of an insured person
that first manifests itself after the effective date of insurance and
while the insurance is in force."
   (2) The definition may be further modified to exclude sicknesses
or diseases for which benefits are provided under any workers'
compensation, occupational disease, employer's liability, or similar
law.
   10192.55.  (a) With regard to Medicare supplement policies, all
insurers, brokers, agents, and others engaged in the business of
insurance owe a policyholder a duty of honesty, and a duty of good
faith and fair dealing.
   (b) Conduct of an insurer, broker, or agent during the offer and
sale of a Medicare supplement policy previous to the purchase is
relevant to any action alleging a breach of the duty of honesty, and
a duty of good faith and fair dealing set forth in subdivision (a).
   10192.6.  (a) Except for permitted preexisting condition clauses
as described in Sections 10192.7 and 10192.8, a policy or certificate
shall not be advertised, solicited, or issued for delivery as a
Medicare supplement policy if the policy or certificate contains
limitations or exclusions on coverage that are more restrictive than
those of Medicare.
   (b) A Medicare supplement policy or certificate shall not use
waivers to exclude, limit, or reduce coverage or benefits for
specifically named or described preexisting diseases or physical
conditions.
   (c) A Medicare supplement policy or certificate in force shall not
contain benefits that duplicate benefits provided by Medicare.
   10192.7.  A policy or certificate shall not be advertised,
solicited, or issued for delivery as a Medicare supplement policy or
certificate prior to January 1, 2001, unless it meets or exceeds
requirements applicable pursuant to this code that were in effect
prior to that date.
   10192.8.  The following standards are applicable to all Medicare
supplement policies or certificates advertised, solicited, or issued
for delivery on or after January 1, 2001.  A policy or certificate
shall not be advertised, solicited, or issued for delivery as a
Medicare supplement policy or certificate unless it complies with
these benefit standards.
   (a) The following general standards apply to Medicare supplement
policies and certificates and are in addition to all other
requirements of this article:
   (1) A Medicare supplement policy or certificate shall not exclude
or limit benefits for losses incurred more than six months from the
effective date of coverage because it involved a preexisting
condition.  The policy or certificate shall not define a preexisting
condition more restrictively than a condition for which medical
advice was given or treatment was recommended by or received from a
physician within six months before the effective date of coverage.
   (2) A Medicare supplement policy or certificate shall not
indemnify against losses resulting from sickness on a different basis
than losses resulting from accidents.
   (3) A Medicare supplement policy or certificate shall provide that
benefits designed to cover cost-sharing amounts under Medicare will
be changed automatically to coincide with any changes in the
applicable Medicare deductible amount and copayment percentage
factors.  Premiums may be modified to correspond with those changes.

   (4) A Medicare supplement policy or certificate shall not provide
for termination of coverage of a spouse solely because of the
occurrence of an event specified for termination of coverage of the
insured, other than the nonpayment of premium.
   (5) Each Medicare supplement policy shall be guaranteed renewable
or noncancelable.
   (A) The issuer shall not cancel or nonrenew the policy solely on
the ground of health status of the individual.
   (B) The issuer shall not cancel or nonrenew the policy for any
reason other than nonpayment of premium or misrepresentation which is
shown by the issuer to be material to the acceptance for coverage.
The contestability period for Medicare supplement insurance shall be
two years.
   (C) If the Medicare supplement policy is terminated by the master
policyholder and is not replaced as provided under subparagraph (E),
the issuer shall offer certificate holders an individual Medicare
supplement policy that, at the option of the certificate holder,
either provides for continuation of the benefits contained in the
group policy or provides for benefits that otherwise meet the
requirements of one of the standardized policies defined in this
article.
   (D) If an individual is a certificate holder in a group Medicare
supplement policy and membership in the group is terminated, the
issuer shall either offer the certificate holder the conversion
opportunity described in subparagraph (C) or, at the option of the
group policyholder, shall offer the certificate holder continuation
of coverage under the group policy.
   (E) (i) If a group Medicare supplement policy is replaced by
another group Medicare supplement policy purchased by the same
policyholder, the issuer of the replacement policy shall offer
coverage to all persons covered under the old group policy on its
date of termination.  Coverage under the new policy shall
                                not result in any exclusion for
preexisting conditions that would have been covered under the group
policy being replaced.
   (ii) If a Medicare supplement policy or certificate replaces
another Medicare supplement policy or certificate that has been in
force for six months or more, the replacing issuer shall not impose
an exclusion or limitation based on a preexisting condition.  If the
original coverage has been in force for less than six months, the
replacing issuer shall waive any time period applicable to
preexisting conditions, waiting periods, elimination periods, or
probationary periods in the new policy or certificate to the extent
the time was spent under the original coverage.
   (6) Termination of a Medicare supplement policy or certificate
shall be without prejudice to any continuous loss that commenced
while the policy was in force, but the extension of benefits beyond
the period during which the policy was in force may be predicated
upon the continuous total disability of the insured, limited to the
duration of the policy benefit period, if any, or to payment of the
maximum benefits.
   (7) (A) A Medicare supplement policy or certificate shall provide
that benefits and premiums under the policy or certificate shall be
suspended at the request of the policyholder or certificate holder
for the period, not to exceed 24 months, in which the policyholder or
certificate holder has applied for and is determined to be entitled
to Medi-Cal or medicaid under Title XIX of the federal Social
Security Act, but only if the policyholder or certificate holder
notifies the issuer of the policy or certificate within 90 days after
the date the individual becomes entitled to assistance.  Upon
receipt of timely notice, the insurer shall return directly to the
insured that portion of the premium attributable to the period of
Medi-Cal or medicaid eligibility, subject to adjustment for paid
claims.
   (B) If suspension occurs and if the policyholder or certificate
holder loses entitlement to Medi-Cal or medicaid, the policy or
certificate shall be automatically reinstituted, effective as of the
date of termination of entitlement, as of the termination of
entitlement if the policyholder or certificate holder provides notice
of loss of entitlement within 90 days after the date of loss and
pays the premium attributable to the period, effective as of the date
of termination of entitlement, or equivalent coverage shall be
provided if the prior form is no longer available.
   (C) Reinstitution of coverages:
   (i) Shall not provide for any waiting period with respect to
treatment of preexisting conditions.
   (ii) Shall provide for coverage which is substantially equivalent
to coverage in effect before the date of suspension.
   (iii) Shall provide for classification of premiums on terms at
least as favorable to the policyholder or certificate holder as the
premium classification terms that would have applied to the
policyholder or certificate holder had the coverage not been
suspended.
   (8) No Medicare supplement policy may limit coverage exclusively
to a single disease or affliction.
   (b) With respect to the standards for basic (core) benefits common
to all benefit plans, every issuer shall make available a policy or
certificate including only the following basic "core" package of
benefits to each prospective insured.  An issuer may make available
to prospective insureds any of the other Medicare supplement
insurance benefit plans in addition to the basic core package, but
not in lieu of it.  However, the benefits described in paragraphs (6)
and (7) shall not be offered so long as California is required to
disallow these benefits for Medicare beneficiaries by the Health Care
Financing Administration or other agent of the federal government
under Section 1395ss of Title 42 of the United States Code.
   (1) Coverage of Part A Medicare eligible expenses for
hospitalization to the extent not covered by Medicare from the 61st
day to the 90th day, inclusive, in any Medicare benefit period.
   (2) Coverage of Part A Medicare eligible expenses incurred for
hospitalization to the extent not covered by Medicare for each
Medicare lifetime inpatient reserve day used.
   (3) Upon exhaustion of the Medicare hospital inpatient coverage
including the lifetime reserve days, coverage of the Medicare Part A
eligible expenses for hospitalization paid at the Medicare diagnostic
related group (DRG) day outlier per diem or other appropriate
standard of payment, subject to a lifetime maximum benefit of an
additional 365 days.  The provider shall accept the issuer's payment
as payment in full and may not bill the insured for any balance.
   (4) Coverage under Medicare Parts A and B for the reasonable cost
of the first three pints of blood, or equivalent quantities of packed
red blood cells, as defined under federal regulations, unless
replaced in accordance with federal regulations.
   (5) Coverage for the coinsurance amount, or in the case of
hospital outpatient department services, the copayment amount, of
Medicare eligible expenses under Part B regardless of hospital
confinement, subject to the Medicare Part B deductible.
   (6) Coverage of the actual cost, up to the legally billed amount,
of an annual mammogram as provided in Section 10123.81, to the extent
not paid by Medicare.
   (7) Coverage of the actual cost, up to the legally billed amount,
of an annual cervical cancer screening test as provided in Section
10123.18, to the extent not paid by Medicare.
   (c) The following additional benefits shall be included in
Medicare supplement benefit plans B to J, inclusive, only as provided
by Section 10192.9.
   (1) With respect to the Medicare Part A deductible, coverage for
all of the Medicare Part A inpatient hospital deductible amount per
benefit period.
   (2) With respect to skilled nursing facility care, coverage for
the actual billed charges up to the coinsurance amount from the 21st
day to the 100th day, inclusive, in a Medicare benefit period for
posthospital skilled nursing facility care eligible under Medicare
Part A.
   (3) With respect to the Medicare Part B deductible, coverage for
all of the Medicare Part B deductible amount per calendar year
regardless of hospital confinement.
   (4) With respect to 80 percent of the Medicare Part B excess
charges, coverage for 80 percent of the difference between the actual
Medicare Part B charge as billed, not to exceed any charge
limitation established by the Medicare program or state law, and the
Medicare-approved Part B charge.  If the insurer limits payment to a
limiting charge, the insurer has the burden to establish that amount
as the legal limit.
   (5) With respect to 100 percent of the Medicare Part B excess
charges, coverage for all of the difference between the actual
Medicare Part B charge as billed, not to exceed any charge limitation
established by the Medicare program or state law, and the
Medicare-approved Part B charge.  If the insurer limits payment to a
limiting charge, the insurer has the burden to establish that amount
as the legal limit.
   (6) With respect to the basic outpatient prescription drug
benefit, coverage for 50 percent of outpatient prescription drug
charges, after a two hundred fifty dollar ($250) calendar year
deductible, to a maximum of one thousand two hundred fifty dollars
($1,250) in benefits received by the insured per calendar year, to
the extent not covered by Medicare.
   (7) With respect to the extended outpatient prescription drug
benefit, coverage for 50 percent of outpatient prescription drug
charges, after a two hundred fifty dollar ($250) calendar year
deductible, to a maximum of three thousand dollars ($3,000) in
benefits received by the insured per calendar year, to the extent not
covered by Medicare.
   (8) With respect to medically necessary emergency care in a
foreign country, coverage to the extent not covered by Medicare for
80 percent of the billed charges for Medicare-eligible expenses for
medically necessary emergency hospital, physician, and medical care
received in a foreign country, which care would have been covered by
Medicare if provided in the United States and which care began during
the first 60 consecutive days of each trip outside the United
States, subject to a calendar year deductible of two hundred fifty
dollars ($250), and a lifetime maximum benefit of fifty thousand
dollars ($50,000).  For purposes of this benefit, "emergency care"
shall mean care needed immediately because of an injury or an illness
of sudden and unexpected onset.
   (9) With respect to the following, reimbursement shall be for the
actual charges up to 100 percent of the Medicare-approved amount for
each service, as if Medicare were to cover the service as identified
in American Medical Association Current Procedural Terminology (AMA
CPT) codes, up to a maximum of one hundred twenty dollars ($120)
annually under this benefit, however, this benefit shall not include
payment for any procedure covered by Medicare:
   (A) An annual clinical preventive medical history and physical
examination that may include tests and services from subparagraph (B)
and patient education to address preventive health care measures.
   (B) Any one or a combination of the following preventive screening
tests or preventive services, the frequency of which is considered
medically appropriate:
   (i) Fecal occult blood test or digital rectal examination, or
both.
   (ii) Mammogram.
   (iii) Dipstick urinalysis for hematuria, bacteriuria, and
proteinuria.
   (iv) Pure tone, air only, hearing screening test, administered or
ordered by a physician.
   (v) Serum cholesterol screening every five years.
   (vi) Thyroid function test.
   (vii) Diabetes screening.
   (C) Influenza vaccine administered at any appropriate time during
the year and tetanus and diphtheria booster every 10 years.
   (D) Any other tests or preventive measures determined appropriate
by the attending physician.
   (10) With respect to the at-home recovery benefit, coverage for
the actual charges up to forty dollars ($40) per visit and an annual
maximum of one thousand six hundred dollars ($1,600) per year to
provide short-term, at-home assistance with activities of daily
living for those recovering from an illness, injury, or surgery.
   (A) For purposes of this benefit, the following definitions shall
apply:
   (i) "Activities of daily living" include, but are not limited to,
bathing, dressing, personal hygiene, transferring, eating,
ambulating, assistance with drugs that are normally
self-administered, and changing bandages or other dressings.
   (ii) "Care provider" means a duly qualified or licensed home
health aide or homemaker, or a personal care aide or nurse provided
through a licensed home health care agency or referred by a licensed
referral agency or licensed nurses registry.
   (iii) "Home" shall mean any place used by the insured as a place
of residence, provided that the place would qualify as a residence
for home health care services covered by Medicare.  A hospital or
skilled nursing facility shall not be considered the insured's place
of residence.
   (iv) "At-home recovery visit" means the period of a visit required
to provide at-home recovery care, without any limit on the duration
of the visit, except that each consecutive four hours in a 24-hour
period of services provided by a care provider is one visit.
   (B) With respect to coverage requirements and limitations, the
following shall apply:
   (i) At-home recovery services provided shall be primarily services
that assist in activities of daily living.
   (ii) The insured's attending physician shall certify that the
specific type and frequency of at-home recovery services are
necessary because of a condition for which a home care plan of
treatment was approved by Medicare.
   (iii) Coverage is limited to the following:
   (I) No more than the number and type of at-home recovery visits
certified as necessary by the insured's attending physician.  The
total number of at-home recovery visits shall not exceed the number
of Medicare-approved home health care visits under a
Medicare-approved home care plan of treatment.
   (II) The actual charges for each visit up to a maximum
reimbursement of forty dollars ($40) per visit.
   (III) One thousand six hundred dollars ($1,600) per calendar year.

   (IV) Seven visits in any one week.
   (V) Care furnished on a visiting basis in the insured's home.
   (VI) Services provided by a care provider as defined in
subparagraph (A).
   (VII) At-home recovery visits while the insured is covered under
the policy or certificate and not otherwise excluded.
   (VIII) At-home recovery visits received during the period the
insured is receiving Medicare-approved home care services or no more
than eight weeks after the service date of the last Medicare-approved
home health care visit.
   (C) Coverage is excluded for the following:
   (i) Home care visits paid for by Medicare or other government
programs.
   (ii) Care provided by family members, unpaid volunteers, or
providers who are not care providers.
   (11) With respect to new or innovative benefits, an issuer may,
with the prior approval of the commissioner, offer policies or
certificates with new or innovative benefits in addition to the
benefits provided in a policy or certificate that otherwise complies
with the applicable standards.  The new or innovative benefits may
include benefits that are appropriate to Medicare supplement
policies, new or innovative, not otherwise available, cost-effective,
and offered in a manner which is consistent with the goal of
simplification of Medicare supplement policies.
   10192.9.  (a) An issuer shall make available to each prospective
policyholder and certificate holder a policy form or certificate form
containing only the basic (core) benefits, as defined in subdivision
(b) of Section 10192.8.
   (b) No groups, packages, or combinations of Medicare supplement
benefits other than those listed in this section shall be offered for
sale in this state, except as may be permitted by paragraph (11) of
subdivision (c) of Section 10192.8 and by Section 10192.10.
   (c) Benefit plans shall be uniform in structure, language,
designation and format to the standard benefit plans A to J,
inclusive, listed in subdivision (e), and shall conform to the
definitions in Section 10192.4.  Each benefit shall be structured in
accordance with the format provided in subdivisions (b) and (c) of
Section 10192.8 and list the benefits in the order listed in
subdivision (e).  For purposes of this section, "structure, language,
and format" means style, arrangement, and overall content of a
benefit.
   (d) An issuer may use, in addition to the benefit plan
designations required in subdivision (c), other designations to the
extent permitted by law.
   (e) With respect to the makeup of benefit plans, the following
shall apply:
   (1) Standardized Medicare supplement benefit plan A shall be
limited to the basic (core) benefit common to all benefit plans, as
defined in subdivision (b) of Section 10192.8.
   (2) Standardized Medicare supplement benefit plan B shall include
only the following:  the core benefit, plus the Medicare Part A
deductible as defined in paragraph (1) of subdivision (c) of Section
10192.8.
   (3) Standardized Medicare supplement benefit plan C shall include
only the following:  the core benefit, plus the Medicare Part A
deductible, skilled nursing facility care, Medicare Part B
deductible, and medically necessary emergency care in a foreign
country as defined in paragraphs (1), (2), (3), and (8) of
subdivision (c) of Section 10192.8, respectively.
   (4) Standardized Medicare supplement benefit plan D shall include
only the following:  the core benefit, plus the Medicare Part A
deductible, skilled nursing facility care, medically necessary
emergency care in a foreign country, and the at-home recovery benefit
as defined in paragraphs (1), (2), (8), and (10) of subdivision (c)
of Section 10192.8, respectively.
   (5) Standardized Medicare supplement benefit plan E shall include
only the following:  the core benefit, plus the Medicare Part A
deductible, skilled nursing facility care, medically necessary
emergency care in a foreign country, and preventive medical care as
defined in paragraphs (1), (2), (8), and (9) of subdivision (c) of
Section 10192.8, respectively.
   (6) Standardized Medicare supplement benefit plan F shall include
only the following:  the core benefit, plus the Medicare Part A
deductible, the skilled nursing facility care, the Medicare Part B
deductible, 100 percent of the Medicare Part B excess charges, and
medically necessary emergency care in a foreign country as defined in
paragraphs (1), (2), (3), (5), and (8) of subdivision (c) of Section
10192.8, respectively.
   (7) Standardized Medicare supplement benefit high deductible plan
F shall include only the following:  100 percent of covered expenses
following the payment of the annual high deductible plan F
deductible.  The covered expenses include the core benefit, plus the
Medicare Part A deductible, skilled nursing facility care, the
Medicare Part B deductible, 100 percent of the Medicare Part B excess
charges, and medically necessary emergency care in a foreign country
as defined in paragraphs (1), (2), (3), (5), and (8) of subdivision
(c) of Section 10192.8, respectively.  The annual high deductible
plan F deductible shall consist of out-of-pocket expenses, other than
premiums, for services covered by the Medicare supplement plan F
policy, and shall be in addition to any other specific benefit
deductibles.  The annual high deductible Plan F deductible shall be
one thousand five hundred dollars ($1,500) for 1998 and 1999, and
shall be based on the calendar year, as adjusted annually thereafter
by the secretary to reflect the change in the Consumer Price Index
for all urban consumers for the 12-month period ending with August of
the preceding year, and rounded to the nearest multiple of ten
dollars ($10).
   (8) Standardized Medicare supplement benefit plan G shall include
only the following:  the core benefit, plus the Medicare Part A
deductible, skilled nursing facility care, 80 percent of the Medicare
Part B excess charges, medically necessary emergency care in a
foreign country, and the at-home recovery benefit as defined in
paragraphs (1), (2), (4), (8), and (10) of Section 10192.8,
respectively.
   (9) Standardized Medicare supplement benefit plan H shall consist
of only the following:  the core benefit, plus the Medicare Part A
deductible, skilled nursing facility care, basic outpatient
prescription drug benefit, and medically necessary emergency care in
a foreign country as defined in paragraphs (1), (2), (6), and (8) of
Section 10192.8, respectively.
   (10) Standardized Medicare supplement benefit plan I shall consist
of only the following:  the core benefit, plus the Medicare Part A
deductible, skilled nursing facility care, 100 percent of the
Medicare Part B excess charges, basic outpatient prescription drug
benefit, medically necessary emergency care in a foreign country, and
at-home recovery benefit as defined in paragraphs (1), (2), (5),
(6), (8), and (10) of subdivision (c) of Section 10192.8,
respectively.
   (11) Standardized Medicare supplement benefit plan J shall consist
of only the following:  the core benefit, plus the Medicare Part A
deductible, skilled nursing facility care, Medicare Part B
deductible, 100 percent of the Medicare Part B excess charges,
extended outpatient prescription drug benefit, medically necessary
emergency care in a foreign country, preventive medical care, and
at-home recovery benefit as defined in paragraphs (1), (2), (3), (5),
(7), (8), (9), and (10) of subdivision (c) of Section 10192.8,
respectively.
   (12) Standardized Medicare supplement benefit high deductible plan
J shall consist of only the following:  100 percent of covered
expenses following the payment of the annual high deductible plan J
deductible.  The covered expenses include the core benefit, plus the
Medicare Part A deductible, skilled nursing facility care, Medicare
Part B deductible, 100 percent of the Medicare Part B excess charges,
extended outpatient prescription drug benefit, medically necessary
emergency care in a foreign country, preventive medical care benefit,
and at-home recovery benefit as defined in paragraphs (1), (2), (3),
(5), (7), (8), (9), and (10) of subdivision (c) of Section 10192.8,
respectively.  The annual high deductible plan J deductible shall
consist of out-of-pocket expenses, other than premiums, for services
covered by the Medicare supplement plan J policy, and shall be in
addition to any other specific benefit deductibles.  The annual
deductible shall be one thousand five hundred dollars ($1,500) for
1998 and 1999, and shall be based on a calendar year, as adjusted
annually thereafter by the secretary to reflect the change in the
Consumer Price Index for all urban consumers for the 12-month period
ending with August of the preceding year, and rounded to the nearest
multiple of ten dollars ($10).
   10192.10.  (a) (1) This section shall apply to Medicare Select
policies and certificates, as defined in this section.
   (2) A policy or certificate shall not be advertised as a Medicare
Select policy or certificate unless it meets the requirements of this
section.
   (b) For the purposes of this section:
   (1) "Appeal" means dissatisfaction expressed in writing by an
individual insured under a Medicare Select policy or certificate with
the administration, claims practices, or provision of services
concerning a Medicare Select issuer or its network providers.
   (2) "Complaint" means any dissatisfaction expressed by an
individual concerning a Medicare Select issuer or its network
providers.
   (3) "Medicare Select issuer" means an issuer offering, seeking to
offer, advertising, marketing, soliciting, or issuing a Medicare
Select policy or certificate.
   (4) "Medicare Select policy" or "Medicare Select certificate" mean
respectively a Medicare supplement policy or certificate that
contains restricted network provisions.
   (5) "Network provider" means a provider of health care, or a group
of providers of health care, which has entered into a written
agreement with the issuer or other entity to provide benefits insured
under a Medicare Select policy.
   (6) "Restricted network provision" means any provision which
conditions the payment of benefits, in whole or in part, on the use
of network providers.
   (7) "Service area" means the geographic area approved by the
commissioner within which an issuer is authorized to offer a Medicare
Select policy.
   (8) "Grievance" means a written complaint registered by an
individual for resolution under the formal grievance procedure, which
may involve, but is not limited to, the administration, claims
practices or provision of services by the issuer or its network
providers.
   (9) "Medicare Select coverage" means Medicare supplement coverage
through a preferred provider organization or any other type of
restricted network, which coverage has been approved by the
commissioner under this section.
   (10) "Preferred provider organization" means a health care
provider or an entity contracting with health care providers that (A)
establishes alternative or discounted rates of payment, (B) offers
the insureds certain advantages for selecting the member providers,
or (C) withholds from the insureds certain advantages if they choose
providers other than the member providers.  Organizations regulated
as Medicare Select include, but are not limited to, provider groups,
hospital marketing plans, and organizations that are formed or
operated by insurers or third-party administrators.
   (c) The commissioner may authorize an issuer to offer a Medicare
Select policy or certificate pursuant to this section if the
commissioner finds that the issuer has satisfied all of the
requirements of this section.
   (d) A Medicare Select issuer shall not issue a Medicare Select
policy or certificate in this state until its plan of operation has
been approved by the commissioner.
   (e) A Medicare Select issuer shall file a proposed plan of
operation with the commissioner in a format prescribed by the
commissioner.  The plan of operation shall contain at least the
following information:
   (1) Evidence that all covered services that are subject to
restricted network provisions are available and accessible through
network providers, including a demonstration of all of the following:

   (A) That services can be provided by network providers with
reasonable promptness with respect to geographic location, hours of
operation, and afterhour care.  The hours of operation and
availability of afterhour care shall reflect usual practice in the
local area.  Geographic availability shall reflect the usual travel
times within the community.
   (B) That the number of network providers in the service area is
sufficient, with respect to current and expected policyholders, as to
either of the following:
   (i) To deliver adequately all services that are subject to a
restricted network provision.
   (ii) To make appropriate referrals.
   (C) There are written agreements with network providers describing
specific responsibilities.
   (D) Emergency care is available 24 hours per day and seven days
per week.
   (E) In the case of covered services that are subject to a
restricted network provision and are provided on a prepaid basis,
that there are written agreements with network providers prohibiting
the providers from billing or otherwise seeking reimbursement from or
recourse against any individual insured under a Medicare Select
policy or certificate.
   This subparagraph shall not apply to supplemental charges or
coinsurance amounts as stated in the Medicare Select policy or
certificate.
   (2) A statement or map providing a clear description of the
service area.
   (3) A description of the appeal or grievance procedure to be
utilized.
   (4) A description of the quality assurance program, including all
of the following:
   (A) The formal organizational structure.
   (B) The written criteria for selection, retention, and removal of
network providers.
   (C) The procedures for evaluating quality of care provided by
network providers, and the process to initiate corrective action when
warranted.
   (5) A list and description, by specialty, of the network
providers.
   (6) Copies of the written information proposed to be used by the
issuer to comply with subdivision (i).

    (7) Any other information requested by the commissioner.
   (f) (1) A Medicare Select issuer shall file any proposed changes
to the plan of operation, except for changes to the list of network
providers, with the commissioner prior to implementing the changes.
Changes shall be considered approved by the commissioner after 30
days unless specifically disapproved.
   (2) An updated list of network providers shall be filed at the
commissioner's request, but at least quarterly.
   (g) A Medicare Select policy or certificate shall not restrict
payment for covered services provided by nonnetwork providers if:
   (1) The services are for symptoms requiring emergency care or are
immediately required for an unforeseen illness, injury, or condition.

   (2) It is not reasonable to obtain services through a network
provider.
   (h) A Medicare Select policy or certificate shall provide payment
for full coverage under the policy for covered services that are not
available through network providers.
   (i) A Medicare Select issuer shall make full and fair disclosure
in writing of the provisions, restrictions, and limitations of the
Medicare Select policy or certificate to each applicant.  This
disclosure shall include at least the following:
   (1) An outline of coverage sufficient to permit the applicant to
compare the coverage and premiums of the Medicare Select policy or
certificate with both of the following:
   (A) Other Medicare supplement policies or certificates offered by
the issuer.
   (B) Other Medicare Select policies or certificates.
   (2) A description, including address, telephone number, and hours
of operation, of the network providers, including primary care
physicians, specialty physicians, hospitals, and other providers.
   (3) A description of the restricted network provisions, including
payments for coinsurance and deductibles when providers other than
network providers are utilized.
   (4) A description of coverage for emergency and urgently needed
care and other out-of-service area coverage.
   (5) A description of limitations on referrals to restricted
network providers and to other providers.
   (6) A description of the policyholder's or certificate holder's
rights to purchase any other Medicare supplement policy or
certificate otherwise offered by the issuer.
   (7) A description of the Medicare Select issuer's quality
assurance, grievance, and appeal procedure.
   (j) Prior to the sale of a Medicare Select policy or certificate,
a Medicare Select issuer shall obtain from the applicant a signed and
dated form stating that the applicant has received the information
provided pursuant to subdivision (i) and that the applicant
understands the restrictions of the Medicare Select policy or
certificate.  Acknowledgments shall be maintained by the insurer for
at least five years in accordance with Section 10508.
   (k) A Medicare Select issuer shall have and use procedures for
hearing complaints and resolving written appeals and grievances from
the insureds.  The procedures shall be aimed at mutual agreement for
settlement and may include arbitration procedures.
   (1) The appeal and grievance procedure shall be described in the
policy and certificates and in the outline of coverage.
   (2) At the time the policy or certificate is issued, the issuer
shall provide detailed information to the policyholder or certificate
holder describing how an appeal or grievance may be registered with
the issuer.
   (3) Appeals or grievances shall be considered in a timely manner
and shall be transmitted to appropriate fiduciaries who have
authority to fully investigate the issue and take corrective action.

   (4) If an appeal or grievance is found to be valid, corrective
action shall be taken promptly.
   (5) All concerned parties shall be notified about the results of
an appeal or grievance.
   (6) The issuer shall report no later than each March 31st to the
commissioner regarding its appeal or grievance procedure.  The report
shall be in a format prescribed by the commissioner and shall
contain the number of appeals or grievances filed in the past year
and a summary of the subject, nature, and resolution of those appeals
or grievances.
   (7) Detailed information describing in writing how to register an
appeal or grievance shall be provided to the insured prior to, or
simultaneously with, the issuance of the policy or certificate.
   (8) The issuer shall maintain records of each appeal or grievance
for at least five years.
   (l) At the time of initial purchase, a Medicare Select issuer
shall make available to each applicant for a Medicare Select policy
or certificate the opportunity to purchase any Medicare supplement
policy or certificate otherwise offered by the issuer.
   (m) (1) At the request of an individual insured under a Medicare
Select policy or certificate, a Medicare Select issuer shall make
available to the individual insured the opportunity to purchase a
Medicare supplement policy or certificate offered by the issuer that
has comparable or lesser benefits and that does not contain a
restricted network provision.  The issuer shall make the policies or
certificates available without requiring evidence of insurability
after the Medicare Select policy or certificate has been in force for
six months, unless the replacement policy or certificate includes
prescription drug coverage or at-home recovery benefits that were not
included in the Medicare Select coverage.
   (2) For the purposes of this subdivision, a Medicare supplement
policy or certificate will be considered to have comparable or lesser
benefits unless it contains one or more significant benefits not
included in the Medicare Select policy or certificate being replaced.
For the purposes of this paragraph, a significant benefit means
coverage for the Medicare Part A deductible, coverage for
prescription drugs, coverage for at-home recovery services, or
coverage for Medicare Part B excess charges.
   (n) Medicare Select policies and certificates shall provide for
continuation of coverage in the event the commissioner determines
that Medicare Select policies and certificates issued pursuant to
this section should be discontinued due to either the failure of the
Medicare Select program to be reauthorized under law or its
substantial amendment.
   (1) Each Medicare Select issuer shall make available to each
individual insured under a Medicare Select policy or certificate the
opportunity to purchase any Medicare supplement policy or certificate
offered by the issuer which has comparable or lesser benefits and
which does not contain a restricted network provision.  The issuer
shall make the policies and certificates available without requiring
evidence of insurability.
   (2) For the purposes of this subdivision, a Medicare supplement
policy or certificate will be considered to have comparable or lesser
benefits unless it contains one or more significant benefits not
included in the Medicare Select policy or certificate being replaced.
  For the purposes of this paragraph, a significant benefit means
coverage for the Medicare Part A deductible, coverage for
prescription drugs, coverage for at-home recovery services, or
coverage for Medicare Part B excess charges.
   (o) A Medicare Select issuer shall comply with reasonable requests
for data made by state or federal agencies, including the United
States Department of Health and Human Services for the purpose of
evaluating the Medicare Select program.
   (p) The commissioner may grant special Medicare Select status to
plans of guaranteed renewable Medicare supplement coverage provided
through a preferred provider organization, which plans were offered
to the public or in force before the effective date of this section,
if the commissioner determines that the applicants will receive
benefits and consumer protections that are substantially equivalent
to those in other Medicare Select plans identified in this section,
and if the issuer satisfies the following requirements:
   (1) The issuer shall apply within one year of the effective date
of this section by submitting to the commissioner the following
items:
   (A) The current plan of operation as defined in subdivision (e).
   (B) If the written disclosures of subdivision (i) have not been
delivered to each applicant as required, the issuer's plan to
accomplish full disclosure to every insured and to achieve
substantial compliance with subdivision (j).
   (C) The issuer's statement of intent to comply with subdivision
(f).
   (D) If the plan of operation does not comply with the standards of
subdivision (g), (h), (k), (l), or (m), the issuer's plan for
achieving substantial compliance with these subdivisions for every
insured.
   (2) The issuer shall alter the plan as requested by the
commissioner in order to bring the plan into substantial compliance
with Medicare Select standards.
   (3) The issuer shall issue disclosures or other notices to its
insureds regarding its status as Medicare Select as ordered by the
commissioner.
   (4) The issuer shall provide data as provided in subdivision (o).

   10192.11.  (a) An issuer shall not deny or condition the issuance
or effectiveness of any Medicare supplement policy or certificate
available for sale in this state, nor discriminate in the pricing of
a policy or certificate because of the health status, claims
experience, receipt of health care, or medical condition of an
applicant in the case of an application for a policy or certificate
that is submitted prior to or during the six-month period beginning
with the first day of the first month in which an individual is both
65 years of age or older and is enrolled for benefits under Medicare
Part B.  Each Medicare supplement policy and certificate currently
available from an issuer shall be made available to all applicants
who qualify under this subdivision without regard to age.  This
section shall not be construed as preventing the exclusion of
benefits for preexisting conditions as defined in paragraph (1) of
subdivision (a) of Section 10192.8.
   (b) (1) If an applicant qualifies under subdivision (a) and
submits an application during the time period referenced in
subdivision (a) and, as of the date of application, has had a
continuous period of creditable coverage of at least six months, the
issuer shall not exclude benefits based on a preexisting condition.
   (2) If the applicant qualifies under subdivision (a) and submits
an application during the time period referenced in subdivision (a)
and, as of the date of application, has had a continuous period of
creditable coverage that is less than six months, the issuer shall
reduce the period of any preexisting condition exclusion by the
aggregate of the period of creditable coverage applicable to the
applicant as of the enrollment date.  The manner of the reduction
under this subdivision shall be as specified by the commissioner.
   (c) Except as provided in subdivision (b) and Section 10192.23,
subdivision (a) shall not be construed as preventing the exclusion of
benefits under a policy, during the first six months, based on a
preexisting condition for which the policyholder or certificate
holder received treatment or was otherwise diagnosed during the six
months before the coverage became effective.
   (d) An individual enrolled in Medicare Part B by reason of
disability will be entitled to open enrollment described in this
section for six months after he or she reaches age 65.  Every issuer
shall make available to every applicant qualified for open enrollment
all policies and certificates offered by that issuer at the time of
application.  Issuers shall not discourage sales during the open
enrollment period by any means, including the altering of the
commission structure.
   (e) An individual who is 65 years of age or older and enrolled in
Medicare Part B is entitled to open enrollment described in this
section for six months following:
   (1) Receipt of a notice of termination or, if no notice is
received, the effective date of termination, from any
employer-sponsored health plan including an employer-sponsored
retiree health plan.  For purposes of this section,
"employer-sponsored retiree health plan" includes any coverage for
medical expenses that is directly or indirectly sponsored or
established by an employer for employees or retirees, their spouses,
dependents, or other included insureds.
   (2) Termination of health care services for a military retiree or
the retiree's Medicare eligible spouse or dependent as a result of a
military base closure.
   (f) An individual who is 65 years of age or older and enrolled in
Medicare Part B is entitled to open enrollment described in this
section if the individual was covered under a policy, certificate, or
contract providing Medicare supplement coverage but that coverage
terminated because the individual established residence at a location
not served by the plan.
   (g) (1) An individual who was previously enrolled in but whose
coverage was terminated between September 1, 1998, and December 31,
1998, by a Medicare managed care plan shall be entitled to a new
60-day open enrollment period in addition to any open enrollment
authorized by federal law or regulations, for any and all Medicare
supplement coverage provided by Medicare supplement insurers and
available on a guaranteed basis under state and federal law or
regulations for persons terminated by their Medicare managed care
plan.
   (2) The new open enrollment period specified in paragraph (1)
shall commence 90 days after January 1, 2000.
   (3) An individual who was previously enrolled in but whose
coverage was terminated after January 1, 1999, by a Medicare managed
care plan shall be entitled to an additional 60-day open enrollment
period to be added on to and run consecutively after any open
enrollment period authorized by federal law or regulations, for any
and all Medicare supplement coverage provided by Medicare supplement
insurers and available on a guaranteed basis under state and federal
law or regulations for persons terminated by their Medicare managed
care plan.
   (h) An individual shall be entitled to an annual open enrollment
period lasting 30 days or more, commencing with the individual's
birthday, during which time that person may purchase any Medicare
supplement policy, with the exception of a Medicare Select policy,
that offers benefits equal to or lesser than those provided by the
previous coverage.  During this open enrollment period, no issuer
that falls under this provision shall deny or condition the issuance
or effectiveness of Medicare supplement coverage, nor discriminate in
the pricing of coverage, because of health status, claims
experience, receipt of health care, or medical condition of the
individual if, at the time of the open enrollment period, the
individual is covered under another Medicare supplement policy or
contract.  An issuer shall notify a policyholder of his or her rights
under this subdivision at least 30 and no more than 60 days before
the beginning of the open enrollment period.
   10192.12.  (a) (1) With respect to the guaranteed issue of a
Medicare supplement policy, eligible persons are those individuals
described in subdivision (b) who apply to enroll under the policy not
later than 63 days after the date of the termination of enrollment
described in subdivision (b), and who submit evidence of the date of
termination or disenrollment with the application for a Medicare
supplement policy.
   (2) With respect to eligible persons, an issuer shall not deny or
condition the issuance or effectiveness of a Medicare supplement
policy described in subdivision (c) that is offered and is available
for issuance to new enrollees by the issuer, shall not discriminate
in the pricing of such a Medicare supplement policy because of health
status, claims experience, receipt of health care, or medical
condition, and shall not impose an exclusion of benefits based on a
preexisting condition under such a Medicare supplement policy.
   (b) An eligible person is an individual described in any of the
following paragraphs:
   (1) The individual is enrolled under an employee welfare benefit
plan that provides health benefits that supplement the benefits under
Medicare, and the plan terminates, or the plan ceases to provide all
of those supplemental health benefits to the individual.
   (2) The individual is enrolled with a Medicare+Choice organization
under a Medicare+Choice plan Medicare Part C, and any of the
following apply:
   (A) The organization's or plan's certification, under this part,
has been terminated or the organization has terminated or otherwise
discontinued providing the plan in the area in which the individual
resides.
   (B) The individual is no longer eligible to elect the plan because
of a change in the individual's place of residence or other change
in circumstances specified by the secretary, but not including
termination of the individual's enrollment on the basis described in
Section 1851(g)(3)(B) of the federal Social Security Act, where the
individual has not paid premiums on a timely basis or has engaged in
disruptive behavior as specified in standards under Section 1856 of
that act, or the plan is terminated for all individuals within a
residence area.
   (C) The individual demonstrates, in accordance with guidelines
established by the commissioner, either of the following:
   (i) The organization offering the plan substantially violated a
material provision of the organization's contract under this article
in relation to the individual, including the failure to provide an
enrollee on a timely basis medically necessary care for which
benefits are available under the plan or the failure to provide the
covered care in accordance with applicable quality standards.
   (ii) The organization, or agent or other entity acting on the
organization's behalf, materially misrepresented the plan's
provisions in marketing the plan to the individual.
   (D) The individual meets other exceptional conditions as the
commissioner may provide.
   (3) The individual meets both of the following conditions:
   (A) The individual is enrolled with any of the following:
   (i) An eligible organization under a contract under Section 1876
of the federal Social Security Act (Medicare risk or cost).
   (ii) A similar organization operating under demonstration project
authority, effective for periods before April 1, 1999.
   (iii) An organization under an agreement under Section 1833(a)(1)
(A) of the federal Social Security Act (health care prepayment plan).

   (iv) An organization under a Medicare Select policy.
   (B) The individual's enrollment ceases under the same
circumstances that would permit discontinuance of an individual's
election of coverage under the first sentence of Section 1851(e)(4)
of the federal Social Security Act as delineated in paragraph (2) of
subdivision (b).
   (4) The individual is enrolled under a Medicare supplement policy
and the enrollment ceases because of the following:  the insolvency
of the issuer or bankruptcy of the nonissuer organization; the
involuntary termination of coverage or enrollment under the policy;
the issuer of the policy substantially violated a material provision
of the policy; or the issuer, or an agent or other entity acting on
the issuer's behalf, materially misrepresented the policy's
provisions in marketing the policy to the individual.
   (5) The individual meets both of the following conditions:
   (A) The individual was enrolled under a Medicare supplement policy
and terminates enrollment and subsequently enrolls, for the first
time, with any Medicare+Choice organization under a Medicare+Choice
plan under Medicare Part C, any eligible organization under a
contract under Section 1876 of the federal Social Security Act
(Medicare risk or cost), any similar organization operating under
demonstration project authority, an organization under an agreement
under Section 1833(a)(1)(A) of the federal Social Security Act
(health care prepayment plan), or a Medicare Select policy.
   (B) The subsequent enrollment under subparagraph (A) is terminated
by the enrollee during any period within the first 12 months of the
subsequent enrollment (during which the enrollee is permitted to
terminate the subsequent enrollment under Section 1851(e) of the
federal Social Security Act).
   (6) The individual, upon first becoming eligible for benefits
under Medicare Part A at age 65 years, enrolls in a Medicare+Choice
plan under Medicare Part C, and disenrolls from the plan by not later
than 12 months after the effective date of enrollment.
   (c) (1) Under paragraphs (1), (2), (3), and (4) of subdivision
(b), eligible persons are entitled to a Medicare supplement policy
that has a benefit package classified as plan A, B, C, or F offered
by any issuer.
   (2) Under paragraph (5) of subdivision (b), eligible persons are
entitled to the same Medicare supplement policy in which they were
most recently previously enrolled, if available from the same issuer,
or, if not so available, a policy described in paragraph (1) of
subdivision (c).
   (3) Under paragraph (6) of subdivision (b), eligible persons are
entitled to any Medicare supplement policy offered by any issuer.
   (d) (1) At the time of an event described in subdivision (b)
because of which an individual loses coverage or benefits due to the
termination of a contract or agreement, policy, or plan, the
organization that terminates the contract or agreement, the issuer
terminating the policy, or the administrator of the plan being
terminated, respectively, shall notify the individual of his or her
rights under this section, and of the obligations of issuers of
Medicare supplement policies under subdivision (a).  That notice
shall be communicated contemporaneously with the notification of
termination.
   (2) At the time of an event described in subdivision (b) because
of which an individual ceases enrollment under a contract or
agreement, policy, or plan, the organization that offers the contract
or agreement, regardless of the basis for the cessation of
enrollment, the issuer offering the policy, or the administrator of
the plan, respectively, shall notify the individual of his or her
rights under this section, and of the obligations of issuers of
Medicare supplement policies under subdivision (a).  That notice
shall be communicated within ten working days of the issuer receiving
notification of disenrollment.
   10192.13. (a) An issuer shall comply with Section 1882(c)(3) of
the federal Social Security Act (as enacted by Section 4081(b)(2)(C)
of the federal Omnibus Budget Reconciliation Act of 1987 (OBRA),
Public Law 100-203) by doing all of the following and by certifying
compliance on the Medicare supplement insurance experience reporting
form:
   (1) Accepting a notice from a Medicare carrier on dually assigned
claims submitted by participating physicians and suppliers as a claim
for benefits in place of any other claim form otherwise required and
making a payment determination on the basis of the information
contained in that notice.
   (2) Notifying the participating physician or supplier and the
beneficiary of the payment determination.
   (3) Paying the participating physician or supplier directly.
   (4) Furnishing, at the time of enrollment, each enrollee with a
card listing the policy name, number, and a central mailing address
to which notices from a Medicare carrier may be sent.
   (5) Paying user fees for claim notices that are transmitted
electronically or otherwise.
   (6) Providing to the secretary, at least annually, a central
mailing address to which all claims may be sent by Medicare carriers.

   (7) File, by June 30 of each year, with the commissioner a list of
its Medicare supplement policies and certificates offered or issued
or in force in California as of the end of the previous year.
   (A) The list shall identify the issuer by name and address, shall
identify each type of form it offers by name and form number, and
shall differentiate between forms approved in the previous calendar
year and those approved before the previous calendar year.
   (B) The list shall identify all of the following:
   (i) Forms issued and in force but no longer offered in California.

   (ii) Forms that, for any reason, were not filed and approved by
the commissioner.
   (iii) Forms for which the commissioner's approval was withdrawn
within the previous calendar year.
   (iv) The number of forms issued in California in the previous
calendar year, and the number of forms in force in California on
December 31 of the previous calendar year.
   (b) (1) Compliance with the requirements set forth in subdivision
(a) shall be certified on the Medicare supplement insurance
experience reporting form provided by the commissioner.
   (2) The commissioner shall, by September 1 of each year, provide
the secretary with a list identifying each issuer by name and address
and provide the information requested in this section.
   (c) No issuer that administers Medicare coverage and federal
employee programs may require that more than one form be submitted
per claim in order to receive payment or reimbursement under any or
all of those policies or programs.
   10192.14.  (a) (1) (A) With respect to loss ratio standards, a
Medicare supplement policy form or certificate form shall not be
advertised, solicited, or issued for delivery unless the policy form
or certificate form can be expected, as estimated for the entire
period for which rates are computed to provide coverage, to return to
policyholders and certificate holders in the form of aggregate
benefits, not including anticipated refunds or credits, provided
under the policy form or certificate form at least 75 percent of the
aggregate amount of premiums earned in the case of group policies, or
at least 65 percent of the aggregate amount of premiums earned in
the case of individual policies.
   (B) Loss ratio standards shall be calculated on the basis of
incurred claims experience, and earned premiums shall be calculated
for the period and in accordance with accepted actuarial principles
and practices.
   (2) All filings of rates and rating schedules shall demonstrate
that expected claims in relation to premiums comply with the
requirements of this section when combined with actual experience to
date.  Filings of rate revisions shall also demonstrate that the
anticipated loss ratio over the entire future period for which the
revised rates are computed to provide coverage can be expected to
meet the appropriate loss ratio standards.
                                                           (3) For
purposes of applying paragraph (1) of subdivision (a) and paragraph
(3) of subdivision (c) of Section 10192.15 only, policies issued as a
result of solicitations of individuals through the mail or by mass
media advertising, including both print and broadcast advertising,
shall be deemed to be individual policies.
   (b) (1) With respect to refund or credit calculations, an issuer
shall collect and file with the commissioner by May 31 of each year
the data contained in the applicable reporting form required by the
commissioner for each type of coverage in a standard Medicare
supplement benefit plan.
   (2) If on the basis of the experience as reported the benchmark
ratio since inception (ratio 1) exceeds the adjusted experience ratio
since inception (ratio 3), then a refund or credit calculation is
required.  The refund calculation shall be done on a statewide basis
for each type in a standard Medicare supplement benefit plan.  For
purposes of the refund or credit calculation, experience on policies
issued within the reporting year shall be excluded.
   (3) For the purposes of this section, with respect to policies or
certificates advertised, solicited, or issued for delivery prior to
January 1, 2001, the issuer shall make the refund or credit
calculation separately for all individual policies, including all
group policies subject to an individual loss ratio standard when
issued, combined and all other group policies combined for experience
after January 1, 2001.  The first report pursuant to paragraph (1)
shall be due by May 31, 2003.
   (4) A refund or credit shall be made only when the benchmark loss
ratio exceeds the adjusted experience loss ratio and the amount to be
refunded or credited exceeds a de minimis level.  The refund shall
include interest from the end of the calendar year to the date of the
refund or credit at a rate specified by the secretary, but in no
event shall it be less than the average rate of interest for 13-week
Treasury notes.  A refund or credit against premiums due shall be
made by September 30 following the experience year upon which the
refund or credit is based.
   (c) An issuer of Medicare supplement policies and certificates
shall file annually its rates, rating schedule, and supporting
documentation including ratios of incurred losses to earned premiums
by policy duration for approval by the commissioner in accordance
with the filing requirements and procedures prescribed by the
commissioner and this code.  The supporting documentation shall also
demonstrate in accordance with actuarial standards of practice using
reasonable assumptions that the appropriate loss ratio standards can
be expected to be met over the entire period for which rates are
computed.  The demonstration shall exclude active life reserves.  An
expected third-year loss ratio that is greater than or equal to the
applicable percentage shall be demonstrated for policies or
certificates in force less than three years.
   As soon as practicable, but prior to the effective date of
enhancements in Medicare benefits, every issuer of Medicare
supplement policies or certificates shall file with the commissioner,
in accordance with applicable filing procedures, all of the
following:
   (1) (A) Appropriate premium adjustments necessary to produce loss
ratios as anticipated for the current premium for the applicable
policies or certificates.  The supporting documents necessary to
justify the adjustment shall accompany the filing.
   (B) An issuer shall make premium adjustments necessary to produce
an expected loss ratio under the policy or certificate to conform to
minimum loss ratio standards for Medicare supplement policies and
that are expected to result in a loss ratio at least as great as that
originally anticipated in the rates used to produce current premiums
by the issuer for the Medicare supplement policies or certificates.
No premium adjustment that would modify the loss ratio experience
under the policy other than the adjustments described in this section
shall be made with respect to a policy at any time other than upon
its renewal date or anniversary date.
   (C) If an issuer fails to make premium adjustments acceptable to
the commissioner, the commissioner may order premium adjustments,
refunds, or premium credits deemed necessary to achieve the loss
ratio required by this section.
   (2) Any appropriate riders, endorsements, or policy forms needed
to accomplish the Medicare supplement policy or certificate
modifications necessary to eliminate benefit duplications with
Medicare.  The riders, endorsements, or policy forms shall provide a
clear description of the Medicare supplement benefits provided by the
policy or certificate.
   (d) The commissioner may conduct a public hearing to gather
information concerning a request by an issuer for an increase in a
rate for a policy form or certificate form issued before or after the
effective date of January 1, 2001, if the experience of the form for
the previous reporting period is not in compliance with the
applicable loss ratio standard.  The determination of compliance is
made without consideration of any refund or credit for the reporting
period.  Public notice of the hearing shall be furnished in a manner
deemed appropriate by the commissioner.
   10192.15.  (a) An issuer shall not advertise, solicit, or issue
for delivery a policy or certificate to a resident of this state
unless the policy form or certificate form has been filed with and
approved by the commissioner in accordance with filing requirements
and procedures prescribed by the commissioner.  Master policies
issued outside California shall be filed for informational purposes
along with the certificates.  Until January 1, 2001, or 90 days after
approval of Medicare supplement policies or certificates submitted
for approval pursuant to this section, whichever is later, issuers
may continue to offer and market previously approved Medicare
supplement policies or certificates.
   (b) (1) An issuer shall not use or change premium rates for a
Medicare supplement policy or certificate unless the rates, rating
schedule, and supporting documentation have been filed with and
approved by the commissioner in accordance with the filing
requirements and procedures prescribed by the commissioner.
   (2) Paragraph (1) of subdivision (b) of Section 10290 shall not
apply to Medicare supplement insurance forms or rates.  However, the
commissioner may authorize in writing, for good cause only, the
limited use of a form or rates after that form or the rates have been
filed with the commissioner for 60 days and have not otherwise been
acted upon.
   (c) (1) Except as provided in paragraph (2), an issuer shall not
file for approval more than one form of a policy or certificate of
each type for each standard Medicare supplement benefit plan.
   (2) An issuer may offer, with the approval of the commissioner, up
to four additional policy forms or certificate forms of the same
type for the same standard Medicare supplement benefit plan, one for
each of the following cases:
   (A) The inclusion of new or innovative benefits.
   (B) The addition of either direct response or agent marketing
methods.
   (C) The addition of either guaranteed issue or underwritten
coverage.
   (D) The offering of coverage to individuals eligible for Medicare
by reason of disability.
   (3) For the purposes of this section, a "type" means an individual
policy, a group policy, an individual Medicare Select policy, or a
group Medicare Select policy.
   (d) (1) Except as provided in subdivision (a), an issuer shall
continue to make available for purchase any policy form or
certificate form issued after January 1, 2001, that has been approved
by the commissioner.   A policy form or certificate form shall not
be considered to be available for purchase unless the issuer has
actively offered it for sale in the previous 12 months.
   (A) An issuer may discontinue the availability of a policy form or
certificate form if the issuer provides to the commissioner in
writing its decision at least 60 days prior to discontinuing the
availability of the form of the policy or certificate.  After receipt
of the notice by the commissioner, the issuer shall no longer offer
for sale the policy form or certificate form in this state.
   (B) An issuer that discontinues the availability of a policy form
or certificate form pursuant to subparagraph (A) shall not file for
approval a new policy form or certificate form of the same type for
the same standard Medicare supplement benefit plan as the
discontinued form for a period of five years after the issuer
provides notice to the commissioner of the discontinuance.  The
period of discontinuance may be reduced if the commissioner
determines that a shorter period is appropriate.
   (2) The sale or other transfer of Medicare supplement business to
another issuer shall be considered a discontinuance for the purposes
of this subdivision.
   (3) A change in the rating structure or methodology shall be
considered a discontinuance under paragraph (1) unless the issuer
complies with the following requirements:
   (A) The issuer provides an actuarial memorandum, in a form and
manner prescribed by the commissioner, describing the manner in which
the revised rating methodology and resultant rates differ from the
existing rating methodology and existing rates.  The commissioner may
approve the change if it is in the public interest.
   (B) The issuer does not subsequently put into effect a change of
rates or rating factors that would cause the percentage differential
between the discontinued and subsequent rates as described in the
actuarial memorandum to change.  The commissioner may approve a
change to the differential which is in the public interest.  The
commissioner may approve a change to the differential if it is in the
public interest.
   (e) (1) Except as provided in paragraph (2), the experience of all
policy forms or certificate forms of the same type in a standard
Medicare supplement benefit plan shall be combined for purposes of
the refund or credit calculation prescribed in Section 10192.13.
   (2) Forms assumed under an assumption reinsurance agreement shall
not be combined with the experience of other forms for purposes of
the refund or credit calculation.
   10192.16.  (a) An issuer or other entity may provide commission or
other compensation to an agent or other representative for the sale
of a Medicare supplement policy or certificate only if the first year
commission or other first year compensation is no more than 200
percent of the commission or other compensation paid for selling or
servicing the policy or certificate in the second year or period.
Every insurer shall file with the commissioner its commission
structure or an explanation of the insurer's plan to comply with this
provision.
   (b) The commission or other compensation provided in subsequent
renewal years must be the same as that provided in the second year or
period and must be provided for no fewer than five renewal years.
   (c) No issuer or other entity shall provide compensation to its
agents or other producers, and no agent or producer shall receive
compensation, greater than the renewal compensation payable by the
replacing issuer on renewal policies or certificates if an existing
policy or certificate is replaced.
   (d) For purposes of this section, "commission" or "compensation"
includes pecuniary or nonpecuniary remuneration of any kind relating
to the sale or renewal of the policy or certificate, including, but
not limited to, bonuses, gifts, prizes, awards, and finders' fees.
   10192.165.  (a) (1) As prescribed in this chapter, the
commissioner shall have the administrative authority to assess
penalties against issuers, brokers, agents, and other entities
engaged in the business of insurance or any other person or entity
for violations of this article.
   (2) Upon a showing of a violation of this article in any civil
action, a court may also assess the penalties prescribed in this
chapter.
   (3) Whenever the commissioner has reasonable cause to believe or
determines after a public hearing that any issuer, agent, broker, or
other person or entity engaged in the business of insurance, has
violated this article he or she shall make and serve upon the issuer,
broker, or other person or entity a notice of hearing.  The notice
shall state the commissioner's intent to assess the administrative
penalties, the time and place of the hearing, and the conduct,
condition, or ground upon which the commissioner is holding the
hearing and assessing the penalties.  The hearing shall occur within
30 days after the notice is served.  Within 30 days after the hearing
the commissioner shall issue an order specifying the amount of
penalties to be paid.  The penalties resulting from the hearing shall
be paid to the Insurance Fund.
   (4) The powers vested in the commissioner by this section shall be
additional to any and all powers and remedies vested in the
commissioner by law.
   (b) (1) Any broker, agent, or other person or entity engaged in
the business of insurance, other than an issuer, who violates this
article is liable for administrative penalties of no less than two
hundred fifty dollars ($250) for the first violation.
   (2) Any broker, agent, other person, or other entity engaged in
the business of insurance, other than an issuer, who engages in
practices prohibited by this chapter a second or subsequent time or
who commits a knowing violation of this article, is liable for
administrative penalties of no less than one thousand dollars
($1,000) and no more than twenty-five thousand dollars ($25,000) for
each violation.
   (3) Any issuer who violates this article is liable for
administrative penalties of no less than two thousand five hundred
dollars ($2,500) for the first violation.
   (4) Any issuer who violates this article with a frequency as to
indicate a general business practice or commits a knowing violation
of this article, is liable for administrative penalties of no less
than ten thousand dollars ($10,000) and no more than one hundred
thousand dollars ($100,000) for each violation.
   (c) (1) Actions for injunctive relief, penalties in the amounts
specified in subdivision (a), damages, restitution, and all other
remedies provided for in law, may be brought in superior court by the
Attorney General, district attorney, or city attorney on behalf of
the people of the State of California.
   (2) The court shall award reasonable attorney's fees and costs to
a prevailing plaintiff who establishes a violation of this article.
   (d) In addition to any other applicable penalties, the
commissioner may require issuers, agents, brokers, or other persons
or entities violating any provision of this article or regulations
promulgated pursuant to this article, to cease marketing in this
state any Medicare supplement policy or certificate or may require
the issuer, agent, broker, or other person or entity to take such
actions as are necessary to comply with the provisions of this
article, or both.
   (e) Any person who knowingly or intentionally violates any
provision of this article is guilty of a public offense punishable by
imprisonment in a county jail not exceeding one year or by
imprisonment in the state prison or by a fine not exceeding ten
thousand dollars ($10,000), or by both that imprisonment and fine.
   (f) (1) The requirements and remedies provided by this article are
in addition to any other remedies provided by law.
   (2) If any provision of this article or the application thereof to
any person or circumstances is held invalid, that invalidity shall
not affect other provisions or applications of the article which can
be given effect without the invalid provision or application, and to
this end the provisions of this article are severable.
   10192.17.  (a) Medicare supplement policies and certificates shall
include a renewal, continuation, or conversion provision.  The
language or specifications of the provision shall be consistent with
the type of contract issued.  The provision shall be appropriately
captioned and shall appear on the first page of the policy, and shall
include any reservation by the issuer of the right to change
premiums and any automatic renewal premium increases based on the
policyholder's age.
   (b) Except for riders or endorsements by which the issuer
effectuates a request made in writing by the insured, exercises a
specifically reserved right under a Medicare supplement policy, or is
required to reduce or eliminate benefits to avoid duplication of
Medicare benefits, all riders or endorsements added to a Medicare
supplement policy after the date of issue or upon reinstatement or
renewal that reduce or eliminate benefits or coverage in the policy
shall require a signed acceptance by the insured.  After the date of
policy or certificate issue, any rider or endorsement which increases
benefits or coverage with a concomitant increase in premium during
the policy term shall be agreed to in writing signed by the insured,
unless the benefits are required by the minimum standards for
Medicare supplement policies, or if the increased benefits or
coverage is required by law.  Where a separate additional premium is
charged for benefits provided in connection with riders or
endorsements, the premium charge shall be set forth in the policy.
   (c) Medicare supplement policies or certificates shall not provide
for the payment of benefits based on standards described as "usual
and customary," "reasonable and customary," or words of similar
import.
   (d) If a Medicare supplement policy or certificate contains any
limitations with respect to preexisting conditions, those limitations
shall appear as a separate paragraph of the policy and be labeled as
"Preexisting Condition Limitations."
   (e) Medicare supplement policies and certificates shall have a
notice prominently printed on the first page of the policy or
certificate, and of the outline of coverage, or attached thereto, in
no less than 10-point uppercase type, stating in substance that the
policyholder or certificate holder shall have the right to return the
policy or certificate, via regular mail, within 30 days of receiving
it, and to have the full premium refunded if, after examination of
the policy or certificate, the insured person is not satisfied for
any reason.  The return shall void the contract from the beginning,
and the parties shall be in the same position as if no contract had
been issued.
   (2) For purposes of this section, a timely manner shall be no
later than 30 days after the issuer receives the returned contract.
   (3) If the issuer fails to refund all prepaid or periodic charges
paid in a timely manner, then the applicant shall receive interest on
the paid charges at the legal rate of interest on judgments as
provided in Section 685.010 of the Code of Civil Procedure.  The
interest shall be paid from the date the issuer received the returned
contract.
   (f) (1) Issuers of disability insurance policies, certificates, or
contracts that provide hospital or medical expense coverage on an
expense incurred or indemnity basis, other than incidentally, to
persons eligible for Medicare shall provide to those applicants a
Guide to Health Insurance for People with Medicare in the form
developed jointly by the National Association of Insurance
Commissioners and the Health Care Financing Administration and in a
type size no smaller than 12-point type.  Delivery of the guide shall
be made whether or not the policies or certificates are advertised,
solicited, or issued for delivery as Medicare supplement policies or
certificates as defined in this article.  Except in the case of
direct response issuers, delivery of the guide shall be made to the
applicant at the time of application, and acknowledgment of receipt
of the guide shall be obtained by the issuer.  Direct response
issuers shall deliver the guide to the applicant upon request, but
not later than at the time the policy is delivered.
   (2) For the purposes of this section, "form" means the language,
format, type size, type proportional spacing, bold character, and
line spacing.
   (g) As soon as practicable, but no later than 30 days prior to the
annual effective date of any Medicare benefit changes, an issuer
shall notify its policyholders and certificate holders of
modifications it has made to Medicare supplement policies or
certificates in a format acceptable to the commissioner.  The notice
shall include both of the following:
   (1) A description of revisions to the Medicare program and a
description of each modification made to the coverage provided under
the Medicare supplement policy or certificate.
   (2) Inform each policyholder or certificate holder as to when any
premium adjustment is to be made due to changes in Medicare.
   (h) The notice of benefit modifications and any premium
adjustments shall be in outline form and in clear and simple terms so
as to facilitate comprehension.
   (i) The notices shall not contain or be accompanied by any
solicitation.
   (j) (1) Issuers shall provide an outline of coverage to all
applicants at the time application is presented to the prospective
applicant and, except for direct response policies, shall obtain an
acknowledgment of receipt of the outline from the applicant.  If an
outline of coverage is provided at the time of application and the
Medicare supplement policy or certificate is issued on a basis which
would require revision of the outline, a substitute outline of
coverage properly describing the policy or certificate shall
accompany the policy or certificate when it is delivered and contain
the following statement, in no less than 12-point type, immediately
above the company name:

   "NOTICE:  Read this outline of coverage carefully.  It is not
identical to the outline of coverage provided upon application and
the coverage originally applied for has not been issued."

   (2) The outline of coverage provided to applicants pursuant to
this section consists of four parts:  a cover page, premium
information, disclosure pages, and charts displaying the features of
each benefit plan offered by the issuer.  The outline of coverage
shall be in the language and format prescribed below in no less than
12-point type.  All plans A-J shall be shown on the cover page, and
the plans that are offered by the issuer shall be prominently
identified.  Premium information for plans that are offered shall be
shown on the cover page or immediately following the cover page and
shall be prominently displayed.  The premium and mode shall be stated
for all plans that are offered to the prospective applicant.  All
possible premiums for the prospective applicant shall be illustrated.

   (3) The commissioner may adopt regulations to implement this
article, including, but not limited to, regulations that specify the
required information to be contained in the outline of coverage
provided to applicants pursuant to this section, including the format
of tables, charts, and other information.
   (k) (1) Any disability insurance policy or certificate, a basic,
catastrophic or major medical expense policy, or single premium
nonrenewal policy or certificate issued to persons eligible for
Medicare, other than a Medicare supplement policy, a policy issued
pursuant to a contract under Section 1876 of the federal Social
Security Act (42 U.S.C.A. Sec. 1395 et seq.), a disability income
policy, or any other policy identified in subdivision (b) of Section
10192.3, advertised, solicited, or issued for delivery in this state
to persons eligible for Medicare, shall notify insureds under the
policy that the policy is not a Medicare supplement policy or
certificate.  The notice shall either be printed or attached to the
first page of the outline of coverage delivered to insureds under the
policy, or if no outline of coverage is delivered, to the first page
of the policy or certificate delivered to insureds.  The notice
shall be in no less than 12-point type and shall contain the
following language:

   "THIS (POLICY OR CERTIFICATE) IS NOT A MEDICARE SUPPLEMENT (POLICY
OR CONTRACT).  If you are eligible for Medicare, review the Guide to
Health Insurance for People with Medicare available from the
company."

   (2) Applications provided to persons eligible for Medicare for the
disability insurance policies or certificates described in paragraph
(1) shall disclose the extent to which the policy duplicates
Medicare in a manner required by the commissioner.  The disclosure
statement shall be provided as a part of, or together with, the
application for the policy or certificate.
   (l) (1) Insurers issuing Medicare supplement policies or
certificates for delivery in California shall provide an outline of
coverage to all applicants at the time of presentation for
examination or sale as provided in Section 10605, and in no case
later than at the time the application is made.  Except for direct
response policies, insurers shall obtain a written acknowledgment of
receipt of the outline from the applicant.
   Any advertisement that is not a presentation for examination or
sale as defined in subdivision (e) of Section 10601 shall contain a
notice in no less than 10-point uppercase type that an outline of
coverage is available upon request.  The insurer or agent that
receives any request for an outline of coverage shall provide an
outline of coverage to the person making the request within 14 days
of receipt of the request.
   (2) If an outline of coverage is provided at or before the time of
application and the Medicare supplement policy or certificate is
issued on a basis that would require revision of the outline, a
substitute outline of coverage properly describing the policy or
certificate shall accompany the policy or certificate when it is
delivered and contain the following statement, in no less than
12-point type, immediately above the name:

   "NOTICE:  Read this outline of coverage carefully.  It is not
identical to the outline of coverage provided upon application and
the coverage originally applied for has not been issued."

   (3) The outline of coverage shall be in the language and format
prescribed in this subdivision in no less than 12-point type, and
shall include the following items in the order prescribed below.
Titles, as set forth below in paragraphs (B) to (H), inclusive, shall
be capitalized, centered, and printed in boldface type.  The outline
of coverage shall include the items, and in the same order,
specified in the chart set forth in paragraph (4) of subdivision (C)
of Section 17 of the Model Regulation to implement the NAIC Medicare
Supplement Insurance Minimum Standards Model Act, as adopted
                                   by the National Association of
Insurance Commissioners on July 30, 1991.
   (A) The cover page shall contain the 10-plan (A through J) chart.
The plans offered by the insurer shall be clearly identified.
Innovative benefits shall be explained in a manner approved by the
commissioner.  The text shall read:

   "Medicare supplement insurance can be sold in only 10 standard
plans.  This chart shows the benefits included in each plan.  Every
insurance company must offer Plan A.  Some plans may not be
available.
   The BASIC BENEFITS included in ALL plans are:
   Hospitalization:  Medicare Part A coinsurance plus coverage for
365 additional days after Medicare benefits end.
   Medical expenses:  Medicare Part B coinsurance (usually 20 percent
of the Medicare-approved amount).
   Blood:  First three pints of blood each year.
   Mammogram:  One annual screening to the extent not covered by
Medicare.
   Cervical cancer test:  One annual screening."

   (Reference to the mammogram and cervical cancer test shall not be
included so long as California is required to disallow them for
Medicare beneficiaries by the Health Care Financing Administration or
other agent of the federal government under 42 U.S.C. Sec. 1395ss.)
   (B) PREMIUM INFORMATION.  Premium information for plans that are
offered by the insurer shall be shown on, or immediately following,
the cover page and shall be clearly and prominently displayed.  The
premium and mode shall be stated for all offered plans.  All possible
premiums for the prospective applicant shall be illustrated in
writing.  If the premium is based on the increasing age of the
insured, information specifying when and how premiums will change
shall be clearly illustrated in writing.  The text shall state:  "We
(the insurer's name) can only raise your premium if we raise the
premium for all policies like yours in California."
   (C) The text shall state:  "Use this outline to compare benefits
and premiums among policies."
   (D) READ YOUR POLICY VERY CAREFULLY.  The text shall state:  "This
is only an outline describing your policy's most important features.
  The policy is your insurance contract.  You must read the policy
itself to understand all of the rights and duties of both you and
your insurance company."
   (E) THIRTY-DAY RIGHT TO RETURN THIS POLICY.  The text shall state:
  "If you find that you are not satisfied with your policy, you may
return it to (insert the insurer's address).  If you send the policy
back to us within 30 days after you receive it, we will treat the
policy as if it has never been issued and return all of your
payments."
   (F) POLICY REPLACEMENT.  The text shall read:  "If you are
replacing another health insurance policy, do NOT cancel it until you
have actually received your new policy and are sure you want to keep
it."
   (G) DISCLOSURES.  The text shall read:  "This policy may not fully
cover all of your medical costs." "Neither this company nor any of
its agents are connected with Medicare."  "This outline of coverage
does not give all the details of Medicare coverage.  Contact your
local social security office or consult "The Medicare Handbook" for
more details."  "For additional information concerning policy
benefits, contact the Health Insurance Counseling and Advocacy
Program (HICAP) or your agent.  Call the HICAP toll-free telephone
number, 1-800-434-0222, for a referral to your local HICAP office.
HICAP is a service provided free of charge by the State of
California."
   The disclosure required by this paragraph, as revised by
amendments made during the 1996 portion of the 1995-96 Regular
Session, shall be included in the required disclosure form no later
than January 1, 1998.
   (H) (For policies that are not guaranteed issue) COMPLETE ANSWERS
ARE IMPORTANT.  The text shall read:  "When you fill out the
application for a new policy, be sure to answer truthfully and
completely all questions about your medical and health history.  The
company may have the right to cancel your policy and refuse to pay
any claims if you leave out or falsify important medical information.

   Review the application carefully before you sign it.  Be certain
that all information has been properly recorded."
   (I) An example showing a physician's charge, which is equal to or
less than the allowable limiting charge for the current year, of two
thousand dollars ($2,000), the amount that Medicare would approve,
the amount that Medicare would pay, the amount that the policy or
certificate would pay, and any amount that would be owed by the
insured, assuming that the annual deductible has already been paid.
The statement shall be prominently displayed and in type no smaller
than other type on the page.
   (J) One chart for each benefit plan offered by the insurer showing
the services, Medicare payments, payments under the policy and
payments expected from the insured, using the same uniform format and
language.  No more than four plans may be shown on one page.
Include an explanation of any innovative benefits in a manner
approved by the commissioner.
   10192.18.  (a) Application forms shall include the following
questions designed to elicit information as to whether, as of the
date of the application, the applicant has another Medicare
supplement or other health insurance policy or certificate in force
or whether a Medicare supplement policy or certificate is intended to
replace any other disability policy or certificate presently in
force.  A supplementary application or other form to be signed by the
applicant and agent containing those questions and statements may be
used.
      "(Statements)

   (1) You do not need more than one Medicare supplement policy.
   (2) If you purchase this policy, you may want to evaluate your
existing health coverage and decide if you need multiple coverages.
   (3) You may be eligible for benefits under Medi-Cal and may not
need a Medicare supplement policy.
   (4) The benefits and premiums under your Medicare supplement
policy can be suspended, if requested, during your entitlement to
benefits under Medi-Cal for 24 months.  You must request this
suspension within 90 days of becoming eligible for Medi-Cal.  If you
are no longer entitled to Medi-Cal, your policy will be reinstituted
if requested within 90 days of losing Medi-Cal eligibility.
   (5) Counseling services are available in your state to provide
advice concerning your purchase of Medicare supplement insurance and
concerning medical assistance through the Medi-Cal program, including
benefits as a qualified Medicare beneficiary (QMB) and a specified
low-income Medicare beneficiary (SLMB).  If you want to discuss
buying Medicare supplement insurance with a trained insurance
counselor, call the California Department of Insurance's toll-free
telephone number 1-800-927-HELP, and ask how to contact your local
Health Insurance Counseling and Advocacy Program (HICAP) office.
HICAP is a service provided free of charge by the State of
California.
      (Questions)

   To the best of your knowledge,
   (1) Do you have another Medicare supplement policy or certificate
in force, including an HMO contract?
   (a) If so, with which company?
   (b) If so, do you intend to replace your current Medicare
supplement policy with this policy or certificate?
   (2) Do you have any other health insurance coverage that provides
benefits similar to this Medicare supplement policy?
   (a) If so, with which company?
   (b) What kind of policy?
   (c) Would the benefits duplicate the benefits in this Medicare
supplement policy?
   (3) Are you covered for medical assistance through the Medi-Cal
program:
   (a) As a specified low-income Medicare beneficiary (SLMB)?
   (b) As a qualified Medicare beneficiary (QMB)?
   (c) For other Medi-Cal medical benefits?"

   (b) Agents shall list any other health insurance policies they
have sold to the applicant as follows:
   (1) List policies sold that are still in force.
   (2) List policies sold in the past five years that are no longer
in force.
   (c) In the case of a direct response issuer, a copy of the
application or supplemental form, signed by the applicant, and
acknowledged by the issuer, shall be returned to the applicant by the
issuer upon delivery of the policy.
   (d) Upon determining that a sale will involve replacement of
Medicare supplement coverage, any issuer, other than a direct
response issuer, or its agent, shall furnish the applicant, prior to
issuance for delivery of the Medicare supplement policy or
certificate, a notice regarding replacement of Medicare supplement
coverage.  One copy of the notice signed by the applicant and the
agent, except where the coverage is sold without an agent, shall be
provided to the applicant and an additional signed copy shall be
retained by the issuer as provided in Section 10508.  A direct
response issuer shall deliver to the applicant at the time of the
issuance of the policy the notice regarding replacement of Medicare
supplement coverage.
   (e) The notice required by subdivision (d) for an issuer shall be
in the form specified by the commissioner, using, to the extent
practicable, a model notice prepared by the National Association of
Insurance Commissioners for this purpose.  The replacement notice
shall be printed in no less than 10-point type in substantially the
following form:
      (Insurer's name and address)

      NOTICE TO APPLICANT PLANNING TO REPLACE MEDICARE SUPPLEMENT
COVERAGE

   SAVE THIS NOTICE! IT MAY BE IMPORTANT IN THE FUTURE.

   If you intend to cancel or terminate existing Medicare supplement
insurance and replace it with coverage issued by (company name),
please review the new coverage carefully and replace the existing
coverage ONLY if the new coverage materially improves your position.
DO NOT CANCEL YOUR PRESENT COVERAGE UNTIL YOU HAVE RECEIVED YOUR NEW
POLICY AND ARE SURE THAT YOU WANT TO KEEP IT.
   If you decide to purchase the new coverage, you will have 30 days
after you receive the policy to return it to the insurer, for any
reason, and receive a refund of your money.
   If you want to discuss buying Medicare supplement insurance with a
trained insurance counselor, call the California Department of
Insurance's toll-free telephone number 1-800-927-HELP, and ask how to
contact your local Health Insurance Counseling and Advocacy Program
(HICAP) office.  HICAP is a service provided free of charge by the
State of California.
   STATEMENT TO APPLICANT FROM THE INSURER AND AGENT:  I have
reviewed your current health insurance coverage.  To the best of my
knowledge, the replacement of insurance involved in this transaction
does not duplicate coverage.  In addition, the replacement coverage
contains benefits that are clearly and substantially greater than
your current benefits for the following reasons:
   __ Additional benefits that are:  ______
   __ No change in benefits, but lower premiums.
   __ Fewer benefits and lower premiums.
   __ Other reasons specified here:  ______

   DO NOT CANCEL YOUR PRESENT POLICY UNTIL YOU HAVE RECEIVED YOUR NEW
POLICY AND ARE SURE THAT YOU WANT TO KEEP IT.




_____________________________________________________________________

           (Signature of Agent, Broker, or Other Representative)

_____________________________________________________________________

                          (Signature of Applicant)

_____________________________________________________________________

                                   (Date)

   (f) No issuer, broker, agent, or other person shall cause an
insured to replace a Medicare supplement insurance policy
unnecessarily.  In recommending replacement of any Medicare
supplement insurance, an agent shall make reasonable efforts to
determine the appropriateness to the potential insured.
   10192.185.  In addition to any other requirements of law, the
following shall apply to a Medicare supplement policy:
   (a) The issuer shall not require an amount greater than one month'
s premium to be submitted with an application for the policy of
insurance if interim coverage is not provided.  If interim coverage
is provided, the issuer shall not require an amount greater than two
months' premium for that purpose.  No further premiums may be
collected until the policy is delivered to the applicant.
   (b) The issuer shall notify the applicant within 60 days from the
date the issuer or issuer's authorized representative or producer
receives the application and the amount as to whether or not the
applicant will be issued a policy of insurance.  If the applicant is
not so notified, the issuer or issuer's authorized representative or
producer shall pay interest to the applicant on the funds that the
applicant submitted with the application, at the legal rate of
interest on judgments as provided in Section 685.010 of the Code of
Civil Procedure, from the date the issuer or issuer's authorized
representative or producer received those funds until they are
refunded to the applicant or are applied toward the premium.
   10192.19.  (a) An issuer shall provide a copy of any Medicare
supplement advertisement intended for use in this state whether
through written, radio, or television medium to the commissioner for
review at least 30 days before dissemination of the advertisement.
The advertisement shall comply with all applicable laws of
California.
   (b) A television, radio, mail, or newspaper advertisement which is
designed to produce leads either by use of a coupon or a request to
write or otherwise contact the issuer, a production agent, or other
person or a subsequent advertisement prior to contact shall include
information disclosing that an agent may contact the applicant if
that is the fact.  In addition, an agent who makes contact with a
consumer, as a result of acquiring that consumer's name from a lead
generating device shall disclose that fact in the initial contact
with the consumer.
   (c) No issuer, agent, broker, solicitor, or other person or other
entity shall solicit residents of this state for the purchase of a
Medicare supplement policy through the use of a true or fictitious
name which is deceptive or misleading with regard to the status,
character, or proprietary or representative capacity of the entity or
person or the true purpose of the advertisement.
   (d) For purposes of this section, an advertisement includes
envelopes, stationery, business cards, or other materials designed to
describe and encourage the purchase of a Medicare supplement policy.

   (e) Advertisements may not employ words, letters, initials,
symbols, or other devices which are so similar to those used by
governmental agencies, a nonprofit or charitable institution, senior
organization, or other insurer that they could have the capacity or
tendency to mislead the public.  Examples of misleading materials,
include, but are not limited to, those which imply any of the
following:
   (1) The advertised coverages are somehow provided by or are
endorsed by the governmental agencies or the other insurer.
   (2) The advertiser is the same as, is connected with, or is
endorsed by, the governmental agencies, other entity, or other
insurers.
   (3) That the advertised coverages are somehow provided by or are
endorsed by the governmental agencies, other entity, or other
insurers.
   (f) No advertisement shall use the name of a state or political
subdivision thereof in a policy name or description.
   (g) No advertisement may use any name, service mark, slogan,
symbol, or a device in any manner that implies that the issuer or the
Medicare supplement policy advertised, or that any agency who may
call upon the consumer in response to the advertisement is connected
with a governmental agency, such as the Social Security
Administration.
   (h) No advertisement shall be used that fails to prominently
display the disclaimer to the effect of "Not Connected with or
endorsed by the U.S.  Government or the federal Medicare program."
   (i) No advertisement may imply that the reader may lose a right or
privilege or benefit under federal, state, or local law if he or she
fails to respond to the advertisement.
   (j) An issuer, agent, broker, or other entity may not use an
address so as to mislead or deceive as to the true identity,
location, or licensing status of the issuer, agent, broker, or other
entity.
   (k) No issuer may use, in the trade name of its insurance policy,
any terminology or words so similar to the name of a governmental
agency or governmental program as to have the tendency to confuse,
deceive, or mislead a prospective purchaser.
   (l) All advertisements used by agents, producers, brokers,
solicitors, or other persons of an issuer must have prior written
approval of the issuer before they may be used.
   (m) No issuer, agent, broker, or other entity may solicit a
particular class by use of advertisements which state or imply that
the occupational or other status as members of the class entitles
them to reduced rates on a group or other basis when, in fact, the
policy being advertised is sold only on an individual basis at
regular rates.
   10192.195.  The commissioner may prescribe by regulation a
standard form and the contents of an informational brochure for
persons eligible for Medicare by reason of age which is intended to
improve the buyer's ability to select the most appropriate coverage
and improve the buyer's understanding of Medicare.  Except in the
case of direct response insurance policies, the commissioner may
require by regulation that the information brochure be provided to
any applicant eligible for Medicare concurrently with delivery of the
outline of coverage.  With respect to direct response insurance
policies, the commissioner may require by regulation that the
prescribed brochure be provided upon request to any applicant
eligible for Medicare by reason of age, but in no event later than
the time of policy delivery.
   10192.20.  (a) An issuer, directly or through its producers, shall
do each of the following:
   (1) Establish marketing procedures to ensure that any comparison
of policies by its agents or other producers will be fair and
accurate.
   (2) Establish marketing procedures to ensure that excessive
insurance is not sold or issued.
   (3) Display prominently by type, stamp, or other appropriate
means, on the first page of the policy, the following:

   "Notice to buyer:  This policy may not cover all of your medical
expenses."

   (4) Inquire and otherwise make every reasonable effort to identify
whether a prospective applicant for a Medicare supplement policy
already has health insurance and the types and amounts of that
insurance.
   (5) Establish auditable procedures for verifying compliance with
this subdivision.
   (b) In addition to the practices prohibited by this code or any
other law, the following acts and practices are prohibited:
   (1) Twisting, which means knowingly making any misleading
representation or incomplete or fraudulent comparison of any
insurance policies or insurers for the purpose of inducing or tending
to induce, any person to lapse, forfeit, surrender, terminate,
retain, pledge, assign, borrow on, or convert an insurance policy or
to take out a policy of insurance with another insurer.
   (2) High pressure tactics, which means employing any method of
marketing having the effect of or tending to induce the purchase of
insurance through force, fright, threat, whether explicit or implied,
or undue pressure to purchase or recommend the purchase of
insurance.
   (3) Cold lead advertising, which means making use directly or
indirectly of any method of marketing which fails to disclose in a
conspicuous manner that a purpose of the method of marketing is the
solicitation of insurance and that contact will be made by an
insurance agent or insurance company.
   (c) The terms "Medicare supplement," "Medicare Wrap-Around" and
words of similar import shall not be used unless the policy is issued
in compliance with this article.  The term "Medigap" shall not be
used.
   10192.21.  (a) In recommending the purchase or replacement of any
Medicare supplement policy or certificate an agent shall make
reasonable efforts to determine the appropriateness of a recommended
purchase or replacement.
   (b) Any sale of Medicare supplement coverage that will provide an
individual more than one Medicare supplement policy or certificate is
prohibited.
   10192.22.  (a) On or before March 1 of each year, an issuer shall
report the following information for every individual resident of
this state for which the issuer has in force more than one Medicare
supplement policy or certificate:
   (1) Policy and certificate number.
   (2) Date of issuance.
   (b) The items set forth above must be grouped by individual
policyholder.
   10192.23.  (a) If a Medicare supplement policy or certificate
replaces another Medicare supplement policy or certificate, the
replacing issuer shall waive any time periods applicable to
preexisting conditions, waiting periods, elimination periods, and
probationary periods in the new Medicare supplement policy or
certificate for similar benefits to the extent that time was spent
under the original policy.
   (b) If a Medicare supplement policy or certificate replaces
another Medicare supplement policy or certificate that has been in
effect for at least six months, the replacing policy shall not
provide any time period applicable to preexisting conditions, waiting
periods, elimination periods and probationary periods for benefits
similar to those contained in the original policy or certificate.
  SEC. 5.  No reimbursement is required by this act pursuant to
Section 6 of Article XIIIB of the California Constitution because the
only costs that may be incurred by a local agency or school district
will be incurred because this act creates a new crime or infraction,
eliminates a crime or infraction, or changes the penalty for a crime
or infraction, within the meaning of Section 17556 of the Government
Code, or changes the definition of a crime within the meaning of
Section 6 of Article XIIIB of the California Constitution.
